Most people only think about whether they will have enough to live on when planning their retirement, but ongoing research suggests we should be taking a three-pronged approach that also covers our health and career planning.
The decision to retire should be investigated thoroughly, says Professor Joanne Earl.
Professor Joanne Earl, from Macquarie University’s Centre for Ageing, Cognition and Wellbeing (CACW), has been studying the topic for 15 years, and will be delivering a public lecture on a more holistic approach to retirement planning on 31 March.
“The reality is that a lot of people will exit the workforce planning to retire and then find themselves needing to return out of financial necessity or boredom,” Earl says.
“Coming back may not be as easy as you think, because ageism is a common problem for older people seeking re-employment.
“On top of this, your circumstances have changed, and if you’re being forced back to work, you might not feel the same way about your job anymore. Even if you used to enjoy it, there could be some resentment to contend with.”
One in five retire early
She says health also has a big influence on how we can spend our retirement, so we need to ask ourselves questions such as whether we’ll be well enough to do what we’ve planned, and if we do want to work for longer, whether our health will be good enough to allow that.
About 20 per cent of Australians are forced to retire early because of health considerations, and it’s a number that shocks many people.
We added career advice to the program, so participants could properly consider options like retraining.
Earl and her team have been collaborating on an Australian Research Council Linkage program with researchers from the University of Western Australia and the University of NSW, program sponsor Allianz Retire+ and partner Terry White Chemists.
The program involves a large-scale study where participants undertake a health assessment, sessions with career and financial advisers, and a number of online learning modules, followed by an evaluation component.
Retraining even in retirement
The key focuses have been refined along the way, with career planning added after a separate study on when doctors choose to exit the workforce.
“Doctors tend to delay retirement for two main reasons,” Earl says. “They don’t think they’ve saved enough money, and their identity is very much intertwined with being a doctor. If they aren’t a doctor anymore, then who will they be?
“With that in mind, and the possibility of needing to return to work, we added career advice to the program, so participants could properly consider options like retraining, further training or developing new networks to help future-proof their work options.
“We’re getting them to think about their options broadly, before determining what’s possible from a health perspective. Some people go on to explore whether they could work part-time instead of retiring altogether, and alternative ways they might be able to generate income, maybe making some tweaks to their health to stay at work for longer.”
Most underestimate monetary needs
Even on the better-understood aspect of financial planning, Earl says people often dramatically underestimate how much they will need for retirement – and how long their superannuation will last.
Variables: if you’re expecting to take round-the-world holidays, that’s going to require a different level of retirement income, says Professor Earl.
Information from the Australian Bureau of Statistics shows a government pension is still the main source of income for most retirees. In 2018-19, just 30 per cent of retired men aged older than 45, and 17 per cent of women cited superannuation as their main source of income; the numbers for women were skewed by the fact that some had no personal income. On average, Australian women finish work with 23 per cent less superannuation than men due to time out of the workforce for parental leave and caring, having a severe impact on their retirement finances.
A further challenge is the range of variables influencing the amount each person needs to live comfortably, from where they want to live and whether they own their own home to lifestyle expectations.
“If you don’t own your own home, then you have to take rent into account, and this is something not included by some of the popular calculators of ‘comfortable income’ used to work out retirement needs,” Earl says.
You’re probably faced with the biggest pool of money you’ve ever seen, and you might think, ‘Oh, I’ve got a lot of money!'.
“But if you’re planning on continuing to rent during retirement, then this might still be a considerable expense.
“Likewise, if you’re expecting to take round-the-world holidays, that’s going to require a different level of retirement income than an occasional week at a caravan park, cooking your own meals on the campfire.
“These miscalculations are understandable, because looking at your super account, you’re probably faced with the biggest pool of money you’ve ever seen, and you might think, ‘Oh, I’ve got a lot of money! I’ll be fine.’
“But the reality for some people might be quite different, especially if they are in retirement for longer than expected or have unanticipated expenses.”
Research carefully before quitting
After an initial trial in 2021 involving 113 people aged 50 and older in Adelaide, the program has now been rolled out along the east coast, with 700 participants taking part from Queensland to Tasmania.
Big decision: Professor Earl says people considering retirement should investigate thoroughly before they decide to leave work.
When the interviews, assessments and online modules have been completed, researchers ask questions such as whether the person’s retirement plans have changed, whether they’ve looked at their super balance and started making contributions, if they are better able to understand complex financial information, if they have sought further advice, and whether they have continued to make use of the information they’ve received through, for example, going to the doctor more regularly or undertaking further training.
Findings are close to being published for the Adelaide trial, with the results of the east coast study expected later this year.
“After taking part in the study, a lot of people say, ‘I hadn’t even thought about that,” Earl says.
“Decisions about when and how to leave work are very personal. We aren’t promoting the view that everyone needs to work for longer – just that they investigate more thoroughly before they leave.
“We just want people to make a more considered decision and have all the facts as part of planning for retirement.
“It’s never too late to begin planning for retirement – and it is also important to continue to plan during retirement. Most plans for retirement are never a ‘set and forget’ proposition.”
Retirement: Not Just About The Money lecture is being held at the Australian Hearing Hub on March 31, 5.30-6.30pm
Register free here.
Professor Joanne Earl is a Professor at Macquarie University’s School of Psychological Sciences and the Centre for Ageing, Cognition and Wellbeing.