The truth about why we’re working for longer in retirement

Retirement doesn’t really mean ‘stopping’ work anymore. For most people approaching this phase of life, the plan isn’t to clock out for good; it’s to keep working even after they start tapping into their superannuation.

But we have to ask: Is this because they genuinely want to keep working, or is it driven by the fear of running out of money and scraping by on the age pension, which barely keeps you above the breadline in Australia?

Retirement is being redefined. It’s no longer about stopping work; it’s about managing and balancing your money, health and happiness in a way that suits you.Credit: Simon Letch

The Allianz Retire+ ‘How do we make retirements more epic?’ survey, just released this week, sheds some light on this. We surveyed 850 people approaching and in early retirement across Australia to explore their retirement planning needs, and the message is clear – the traditional templates for retirement are outdated. Today’s retirees, the Baby Boomers, and Gen Xers coming up behind them are having to forge new paths.

We’re all living longer. According to Australian government actuaries, the median life expectancy for today’s 65-year-olds is between 91 and 95, considering ongoing improvements in health and wealth. This longevity has snuck up on us during our lifetimes, catching many pre-retirees off guard.

The reality of retirement today is sobering. A whopping 82 per cent of those surveyed agreed that the age pension simply isn’t enough for a comfortable retirement. And that reality bites.

What’s more, 67 per cent want to front-load their spending in retirement, enjoying the fruits of their labour while they’re still relatively young and healthy.

Retirement is no longer about stopping work; it’s about managing and balancing your money, health and happiness in a way that suits you.

As we approach retirement, the sudden realisation that we need to plan for a much longer life leaves us juggling four key strategies:

• Cutting costs – trimming your lifestyle to fit a smaller budget.
• Building the nest egg – often by downsizing the family home to free up cash.
• Smarter investing – putting your money into income-producing assets that can last a lifetime.
• Working longer – slowing down the drawdown of your superannuation.

And if you’re already nearing retirement and don’t have time to build up more savings than planned, your options narrow to just three: be savvy with your budget, invest in assets that will last your lifetime, or keep working longer.

The data speaks volumes. Only 24 per cent of Australians surveyed feel confident they have enough to provide them with a comfortable retirement, while a significant 49 per cent actively fear running out of money during their retirement years.

Interestingly, around 50 per cent of people admit they have only a basic understanding of how retirement finances work. Most of those who do feel confident say they gained their knowledge through self-directed research – whether through books, newspapers, or their super fund’s website.

Impressively, about 65 per cent of people surveyed have sought financial advice, either from an independent adviser or from their superannuation fund, looking to get advice on investing for income in their future.

But less than 19 per cent had been told about lifetime annuities even though 59 per cent said they would like to consider them in their investment mix.

Lifetime income streams are an emerging category of investment income products that are designed to complement the age pension and a variable income from super by providing a layer of guaranteed income for life.

You allocate a (usually small) portion of your retirement savings to one of these investment products, and when you trigger the income stream, you’re paid a set amount or an amount adjusted for inflation each year, for the rest of your life.

These products are very different from traditional annuities, and the people who invest in them also get discounts on the age pension assets and income tests, potentially lifting their pension income as well as providing them a layer of income from the investment itself. It sounds like a promising solution to the longevity problem, but there’s a catch.

The problem is, despite the government mandating their introduction to help consumers in retirement, some advisers may not yet have grasped how to incorporate it into their retirement advice, so they leave out discussing them altogether.

Meanwhile, super funds, nudged by the government are gradually developing their own retirement income streams, which will eventually make this a mainstream conversation – but they need the government to fix the advice laws to really be able to do more.

This gap in the market right now leaves pre-retirees in a tricky spot, having to learn about what’s right for them and advocate for themselves by asking their funds and advisers proactively and doing their own research.

It’s worth calling out these issues because, at the end of the day, it’s about making sure people can manage and predict their money confidently as they enter this new phase of life, and they need to be able to rely on their funds and their advisers to look after their best interests.

Finally, we need to talk about working, because work plays two contrasting roles in retirement. It provides a supplementary income and a powerful sense of purpose. And the way we want to or have to work is clearly changing.

About 50 per cent of retirees plan to transition into retirement slowly if they can. Working after they retire isn’t off the table; in fact, it’s becoming the norm. Retirement is no longer about giving up work entirely – and you don’t have to.

You can stop working from 60, triggering the conditions of release to put your super into the retirement phase, then start a new job the day after. Or you can keep working and access your superannuation from 65.

We can read between the lines: 38 per cent of people plan to work after they retire, likely because they need to supplement their income beyond what the age pension offers. Another 39 per cent are open to working but haven’t yet decided if they want or need to – these might be the people who are in a position to choose whether they work or not, thanks to secure long-term income sources.

The bottom line is, retirement is being redefined. It’s no longer about stopping work; it’s about managing and balancing your money, health and happiness in a way that suits this longer, more unpredictable phase of life and doing our best to make it epic.

Bec Wilson is the author of bestseller How to Have an Epic Retirement. She writes a weekly newsletter at epicretirement.net and is the host of the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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