Who could have imagined as people celebrated New Year 2020 that just a few months later we’d all become familiar with two new words – “coronavirus” and “COVID-19”? You can add “lockdown” and “social distancing” to the list of new words that have become part of everyday language.
Even though lockdowns are being eased, it’s difficult to imagine life is going to snap back to the way it was pre-COVID. As a recent piece of graffiti in Hong Kong said: “We can’t return to normal, because the normal we had was precisely the problem.”
COVID-19 has been called “the great pause,” a time for reflection and introspection. As it created a massive economic and investment crisis as well as a global health problem, it means many older working Australians – pre-retirees - are faced with major disruptions to their plans. In this article we look at some of these COVID-19 effects – and at the underlying state of retirement planning for many Australians.
Earlier this year, as countries moved into lockdown, MLC commissioned a wealth and retirement behaviour study1 to get a handle on Australians’ views on the relationship between household wealth, planning for retirement and life satisfaction.
The survey highlighted that there’s much more to retirement than wealth, but also that financial concerns shape our view of the future.
Not surprisingly, the survey revealed an increase in the number of people who scaled back their investments, particularly in older age groups. In an uncertain environment, cash took over from super as the most preferred investment asset, despite record low interest rates that mean cash-style assets are easily eroded by inflation.
One of the intriguing attitudinal findings was that retirees have a higher sense of life satisfaction than pre-retirees. It seems that middle age is a time of heightened anxiety but life gets better as we get older.
Drivers of satisfaction in retirement were not money, but relationships with partners, family and friends, as well as a sense of independence, and generally having enough to do with their time.
Most retired Australians spent a large amount on their time on home maintenance, travel/holidays and hobbies. Travel restrictions must have been incredibly frustrating for them.
Interestingly, there was a lot of talk about pets. There’s been a lot of media commentary on the upsurge in pet ownership over recent months as people were confined to their homes. It just emphasises the importance of companion animals.
There were also some worrying findings. Some 43% of retirees thought they had ‘enough’ and 6% that they had ‘more than enough’ wealth to live their desired lifestyle for their rest of their lives. But 47% didn’t believe they had enough.
One possible solution for those who don’t have enough in retirement is to access the equity in their homes to fund higher living standards. However, this has never really caught on in Australia.
In fact, only 6% said they have sold their home and only 3% have used the equity in their home. Non-retirees appear to be more open to the idea with around 16% saying they would sell their home while another 8% say they would use the equity in their home to fund their retirement.
We’re strong advocates for great financial advice because we know that great advice can change people’s lives. Nobody hesitates to take their car to a qualified mechanic when it needs servicing. Or to see a doctor when they’re unwell. So, it’s a bit of a puzzle that so many people don’t get financial advice to set them up for the future.
For those enjoying a comfortable retirement, seeing a financial adviser is more about fine-tuning, a check-in to see that things are still on track.
For others, an adviser may have the research and strategies they need to stretch each investment dollar a little further. And that means a more comfortable retirement – on every level.
For free general advice call 132 652 or find an adviser
1 All figures quoted in this article are taken from MLC Wealth Insights – Q1 2020: Australian Wealth & Behaviour Study Survey. Dean Pearson, Head of Behavioural & Industry Economics, Robert De Lure, Senior Economist Behavioural & Industry Economics. Both are NAB employees.
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