Summary
Four factors to help you feel confident about retirement
Feeling confident in your retirement isn’t just about your super balance alone, you also might want to consider things like how you’ll adjust to your new lifestyle and how you’ll care for your health and wellbeing. That’s why, since 2017 we’ve been in partnership with Monash University on the Retirement Confidence Index (RCI) that examines how people think, feel and plan for life when they finish working.
The RCI shows the 4 factors of retirement confidence include:
- financial awareness and skills
- retirement awareness and planning
- health and wellbeing, and
- social connectedness.
The Retirement Confidence Index: in detail
What makes you confident about approaching retirement? How much money do you have? What is your financial knowledge? How connected do you feel with family and friends? How healthy are you? The reality is these are all crucial factors in living confidently in retirement and your road ahead. The Retirement Confidence Index (RCI)1, a study from AustralianSuper and Monash University, is the first of its kind. It examines how people think, feel and plan for life when they finish working.
The RCI uncovered 4 factors of retirement confidence:
- financial awareness and skills
- retirement awareness and planning
- health and wellbeing, and
- social connectedness.
Each year, the study measures overall retirement confidence and provides an average score out of 100 – with zero indicating ‘least confident’ and 100 indicating ‘most confident’. The score is based on answers to questions from the 4 key pillars.
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Financial awareness and skills
This refers to a person’s level of financial literacy, attitude, behaviour, control over finances and financial anxiety.
The survey found financial literacy was linked to cognitive ability, higher income, home ownership, having more assets than debts, and being financially risk averse.
Whilst financial literacy increases as people head towards retirement, however surveyed women do not feel as confident about their level of financial literacy as men – a trend that has continued for the last 6 years. Women do though exhibit a stronger ability to save and budget than men, which can result in a better retirement. Feeling in control of your finances and understanding super savings are important elements of retirement confidence.
Retirement awareness and planning
This looks at how certain a person feels about the future, and their behaviour in terms of setting goals.
Participants who set clear and specific goals scored much higher than those who didn’t.
Those with a formal education showed higher levels of goal setting, as did homeowners – they also had fewer uncertainties about the future. So did people who were married or in a de facto relationship, retirees, and those with a higher income.
According to the study, migrants were generally less likely to plan for retirement, however, they had similar levels of financial literacy and mental and physical health as people born in Australia – and a similar average level of confidence.
Health and wellbeing
This measures the importance of physical and mental health.
When asked how confident they felt about retirement, respondents with excellent physical health had a higher level of retirement confidence than those with poor health.
Overall, women fared better than men in mental health. Being married or in a de facto relationship, having dependent children, owning your own home and having a university degree also correlates with an improvement in mental health.
Social Connectedness
This examines the impact of social connections.
The survey found women and those who were married or in a de facto relationship were more socially connected. The survey also found migrants were more likely to be missing quality connections.
Retirement is what you work for - Greg’s story
The Retirement Confidence Index: by the numbers
Heading towards retirement and wondering what factors you might need to consider?
The Retirement Confidence Index can help. It’s a research project we undertake with Monash University every year to see how Australians over 50 are feeling about retirement. Since 2017 we’ve surveyed more than 8,000 people, aiming to educate Australians and improve their retirement outcomes.
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Here are some of the key findings.
66 out of 100 - the current Retirement Confidence Score
66 out of 100 - the current Retirement Confidence Score
This is the overall feeling of confidence our survey participants have when thinking about retirement. It reflects how confident people 50 and over are feeling about retirement. The number has gradually increased over the past five years to 2022 for both men and women, from 63 points in 2018. Retirees also reported a higher confidence level of 67 points than pre-retirees, with 63 points.
More than two-thirds - the number of people who wished they had considered their financial needs earlier.
Over 75% regret not planning sooner
Over 75% regret not planning sooner
These participants, aged 50-69, said they wished they’d started to think about their financial needs for retirement in their 40s. While retirement can feel far off for many people, the truth is, it’s never too early or late to start thinking about it. And if you need any extra help, AustralianSuper members have access to a range of options to help members find the advice2 that suits them.
70.5 points out of 100 - the level of social connectedness
70.5 points out of 100 - the level of social connectedness
The survey found that maintaining an active social life can affect retirement confidence. Social connectedness is based on the quality and number of connections a person has in their social circle of family, friends, and peers.
The 2022 results found that women and those who were married or in a de facto relationship were more socially connected.
57 - the financial literacy confidence score for women, compared to 72 for men
57 - the financial literacy confidence score for women, compared to 72 for men
In 2022, Australian women continued to be less confident about retirement than men, even though the report shows they have better budgeting and savings habits. Women with dependents were more anxious about their retirement plans, and those aged under 60 said they should have started planning earlier.
This lack of confidence is reflected in the gender super gap, which sees women retire with 23%3 less super than men in Australia.
65.5 - the average age people plan to retire; 56.3 - the average age people actually retire4
65.5 - the average age people plan to retire; 56.3 - the average age people actually retire4
We found that on average, Australians retire almost 10 years earlier than they expected1. Unexpected circumstances such as redundancy, ill health, being unable to find work, or having to care for a loved one are all reasons retirement can come sooner than planned.
While not being able to choose when you retire is common, it can have a big impact on your financial situation. That’s why it’s important to know your finances and plan ahead – it’s never too early to make plans for when you finish working.
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Important Information
- Source: The 2022 AustralianSuper Monash University Retirement Confidence Index. Based on answers from approximately 3,000 people aged 50 and over. Retirement scores are compared to the Australian average, estimated from the key socio-demographic variables captured in the study.
- Personal financial product advice is provided under the Australian Financial Services Licence held by a third party and not by AustralianSuper Pty Ltd. Fees may apply
- ASFA calls on Government to close retirement savings gender gap - March 2023 LINK TO
- Australian Bureau of Statistics (2020-21), Retirement and Retirement Intentions, Australia, ABS Website, accessed 1 December 2023.