GENERATION X wants to retire at 63 but believe they will need to work almost a decade longer to be able to afford it.
New research by ING has found that Gen X – those aged 39 to 53 – believe they will need an average $1.5 million nest egg. However, they don’t think they will be financially ready to reach that until age 72 and more than half haven’t yet started planning for retirement.
Generation Y – aged 24 to 38 – want to retire earlier, at 61, think they will need more money – $1.74 million – and won’t have it until age 68, the research found.
ING head of retail banking Melanie Evans said the findings suggested a lack of knowledge about super and retirement among people aged under 50. Some were unsure where to start, others focused more on mortgages and short-term living expenses, and many wanted to maintain or improve their lifestyles when they retired “and know that comes at a higher cost”, she said.
“Many of them haven’t sat down and worked out a plan so they’re just making assumptions.”
Ms Evans said it was never too early to start retirement planning, and getting advice was important.
“Start seeing super as your money. It’s nearly one in ten dollars you earn. Track it as you would a savings account or mortgage,” she said.
ING’s research involved 2000 people and also found that Baby Boomers were more likely than younger generations to spend their children’s inheritances.
“As the first generation with superannuation earnings for a large portion of their working life, they also feel as though they’ve earned it and it’s theirs to enjoy,” Ms Evans said.
Pivot Wealth founder and financial adviser Ben Nash said young generations had high aspirations for retirement and did not feel that the pension would be enough.
“I think the boomers and their parents’ generation felt the age pension was their right, but now the reality has set in that in today’s society it’s difficult to maintain a lifestyle at a level that most people want with this money alone,” he said.
“The younger someone is, the higher their expectations generally are around the lifestyle they want to live.”
The age pension currently pays a maximum $907.60 a fortnight and for Gen X and younger can’t be claimed until age 67. Last week Prime Minister Scott Morrison scrapped long-term plans to raise the pension age to 70.
Planning for Prosperity senior financial adviser Bob Budreika said people’s ideas about retirement used “fairly crude figures” that did not factor in whether they would spend less as they aged, or use a combination of pension and their own money.
“I hear Generation X and Y say ‘the pension probably won’t be there when we get there’. People are preparing themselves to be self-sufficient,” he said.
“There will be some sort of social security there but I think the benefits will be less.”
Mr Budreika suggested people use retirement calculators on www.moneysmart.gov.au and super fund websites to project how much they needed.