Young workers could be retiring at 70
A 25-year old Australian can expect to work until the age of 70, as a more highly educated, healthier and increasingly white collar workforce retire progressively later over the coming decades.
A 25-year-old Australian can expect to work until the age of 70, as a more highly educated, healthier and increasingly white-collar workforce retire progressively later over the coming decades.
But new analysis by KPMG shows the steep climb in the retirement age during the Covid-19 pandemic has slowed, particularly as the end of lockdowns and the reopening of borders gave older people the opportunity to restart their retirement travel dreams.
KPMG urban economist Terry Rawnsley said that based on current trends, a 45-year-old woman working today would retire at 64.8 years, and a man at 66.2. That was about three years later than 20 years ago, he said. “People with higher levels of education tend to work a couple of years longer than the average, and the workforce coming through over coming years will be white collar and able to work longer. There will be fewer who find it hard to work into their 60s,” he said.
Mr Rawnsley said that countries such as Japan and South Korea, which were prime examples of rapidly ageing societies, had retirement ages of about 70 and represented the likely trajectory for Australia.
“Over a 20-year period we have seen a couple of years added to the age of retirement. Over the next couple of decades we would could be getting to that 70-year benchmark for expected retirement,” he said.
Mercer senior partner David Knox said the reality of Australians working for longer meant the dire projections from successive Intergenerational Reports were overstated.
Those analyses relied on defining 15 to 64-year-olds as “working age”, and comparing that dwindling share to the expanding over-65s to show the narrowing tax base would struggle to pay the health and aged-care costs of older Australians.
But Dr Knox said “the age of 65 has no relevance when we have moved to 67 for the pension – and that may increase a little again”.
“Better health and education, a more flexible workforce, and technology that allows us to work from the beach or the bush – all that I think means people are looking at opportunities in their 60s and 70s that we didn’t look at 10 to 15 years ago,” he said.
“The other thing that has a longer term impact is that people are settling down later and having children later.
“Their mortgages are higher, so purely at a household level they may well need to work for longer.” He said more could be done to encourage older Australians to stay in the workforce.
He pointed to the fact that the participation rate among New Zealanders aged over 65 years was 25 per cent, against 15 per cent in Australia. In the 55-64 age group, Australia’s participation rate was 69 per cent, versus 80 per cent for Kiwis.
The KPMG analysis shows the Covid-19 pandemic triggered a sharp climb in the expected retirement age for men, from 65 years in 2019 to 66.2 years in 2021.
In comparison, it had taken 12 years for the slow-moving expected retirement age to rise by that much leading up to the pandemic.
Mr Rawnsley said that older Australians had helped plug the workforce gaps left by the collapse in migration during the pandemic.
Between 2019 and 2021, those aged 55 years and over accounted for almost 70 per cent of the 185,000 increase in the labour force.
With the return of international migration, the contribution of the over-55s cohort to labour force growth fell to just over 20 per cent in 2023, leading to a plateau in the expected retirement age for a 45-year-old worker – a forecast based on the latest trends among older working Australians – through 2022 and 2023.
Mr Rawnsley said the end of pandemic lockdowns and associated travel restrictions had removed a major reason why many older people had delayed quitting work.