A survey by Mercer reveals a significant gap between expectations and the reality of retirement. Most people are retiring close to the age of 60, with only 3 per cent retiring at 70 or older. That is despite older people saying they want to work for longer.
"Our research shows uncontrollable triggers can derail the best laid plans for retirement," says David Anderson, Mercer's managing director.
He says we are living longer but retiring earlier than we expect to, which means more years to fund in retirement and fewer working years to save for it.
While the Mercer research does not break down the experiences of retirees by their previous occupations, it is well known that those in some occupations are hit particularly hard by enforced early retirement.
For example, research by the Australian Centre for Financial Studies (commissioned by the Australian Institute of Superannuation Trustees) which was released earlier this year, showed those working in community and personal services, clerical and administrative roles, sales, and as labourers are up to 50 per cent more likely to retire before the age of 60 than professional workers.
The actual experiences of enforced early retirement by retirees will be worse than reported by Mercer because the survey excluded retirees on the full age pension.
The research found that almost three-quarters of people approaching retirement believed they would semi-retire or gradually wind down into full retirement.
Yet, only a little more than a quarter of retirees told the survey that they semi-retired first before moving into full retirement. Two thirds said they moved immediately into full retirement.
"There is a disconnect between expectations and reality of how long we will have to save for retirement," Anderson says. Compounding the disconnect is that many people underestimate their life expectancy. While everyone knows we are living longer, the official life expectancy tables seriously underestimate by how much. These tables are updated every so often, lump white and blue collar workers together, and are out of date when published.
For example, the Australian Bureau of Statistics shows half of males turning 65 in 2010-12 (the latest available projections), can expect to live to 84 and women in the same age range can expect to live to 87, on average.
However, research by Mercer released in August shows a white-collar male retiring at age 65 today has a 50 per cent chance of living to 88. White-collar women have a 50 per cent chance of living to 91. These are the mortality rates of public sector pensioners, who are a good proxy for white-collar workers.
The latest Mercer survey results come as the government tightens access to the age pension. The Abbott government has further increased the qualifying age for the age pension to age 70 by July 1, 2035. It has also extended its "temporary" freeze on the superannuation guarantee. The guarantee will stay at 9.5 per cent for seven years before resuming its rise to 12 per cent.
There is also a real possibility that the superannuation "preservation" age, the age at which people can access their super savings will eventually rise, in order to maintain the five-year difference with the pension age. With a pension age of 70, that would imply a preservation age of 65.
"It is really up to individuals to take more control," Anderson says. Most retirees regret not taking action earlier, such as contributing more their super, he says.
"The SG [superannuation guarantee] is going nowhere for seven years and so it is up to individuals to avoid the sort of circumstances that this survey has found."