Majority of older Australians think they will outlive their savings

Cost-of-living pressures are affecting Australians of every age and occupation. New research, though, has exposed the disproportionate costs for the retirement-age population.

Of those older Australians with savings and investments, 53 per cent believe they will outlive them. Moreover, in 2018 and 2019, around 50 per cent of older Australians who predicted they would outlive their savings were worried about it.

Now, of those who expect to outlive their savings, 86 per cent are worried about it. Clearly, the economic confidence of older Australians has been rocked.

In a recent episode of The HR Leader, money and wellness coach Marc Bineham unpacked the uncertain future of older Australians and the core drivers behind the challenge. To Mr Bineham, it’s the fact that we’re living longer that has fundamentally changed the retirement landscape. Periods of economic concern come and go; they’re cyclical.

“If you’re 65, you could have another 20 [or] 30 years to live. So, the cost-of-living [factor] simply isn’t there. It’s more that, from an age point of view, we’re living longer, and we want quality of life, not quantity of life,” said Mr Bineham.

That said, Mr Bineham said there are two schools of thought. Today, we’re giving air to the other side of the debate: that the cost-of-living crisis spells real, ongoing trouble for Australian retirees.

As noted by Mr Bineham: “We don’t want to outlive our money; that’s the worst thing.” Let’s consider whether this might be a growing reality for older Australians amid inflated cost-of-living pressures.

Cost of living

In September, National Seniors Australia published The Cost of Living and Older Australians’ Financial Wellbeing. The report found that the perceived financial wellbeing of older Australians has suffered considerably over the past few years. Not only are older Australians struggling to meet lifestyle expenses now, but they are also expecting the challenges to persist.

Eighty per cent of respondents felt that the increasing cost of living had impacted their lifestyle, with 83 per cent believing the impact would continue over the next 12 months. More broadly, only 5 per cent of respondents were not concerned about the long-term challenges of keeping up with the rising cost of living.

Respondents were less concerned if they owned a home outright, had more savings, or income from across multiple sources, including super, savings and either wages or the age pension.

“After nearly 30 years of relative stability in the cost of living, retirement planning does not always account for the potential effects of inflation undermining people’s control over their finances,” said National Seniors Australia.

When asked which lifestyle expenses were causing the most concern, respondents pointed to health expenses (68 per cent), energy expenses (66 per cent), and groceries expenses (63 per cent).

In meeting the challenges, respondents are cutting back on spending (62 per cent of respondents), accessing age pension (36 per cent), or relying on investments that return higher than inflation (27 per cent).

“There is a tendency for people to believe they will spend less in later life than in their earlier years of retirement, but concern about long-term increases in the cost of living might have changed spending expectations,” said National Seniors Australia.

While the duration of the cost-of-living crisis is up for debate, there’s no arguing that the financial resources of older Australians are being stretched, and fears abound that the challenge might be long-term.

“In general, older people’s sense of financial resilience and financial security have fallen since the start of the pandemic, and the increasing cost of living has further undermined long-term planning and financial goal setting of older Australians,” explained the head of retirement income research at Challenger, Aaron Minney.

“Certainty of income is vital to give retirees the confidence to spend and peace of mind that they have the financial security to protect their lifestyle, health, and wellbeing throughout their golden years.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Marc Bineham, click below: