Planning for retirement means different things to different people, but for many Australians, it's not all about savings and superannuation. If that's the case, how are they expecting to fund their retirement?
It turns out that many Australians are hoping to receive an inheritance windfall to take the pressure off their financial future. In the meantime, their ommitment to a comfortable lifestyle is chewing up much, if not all of their disposable income. Smashed avocado anyone?
A recent study by IPSOS, in conjuction with MLC found that 17% of Australians say they're waiting for an inheritance. This expectation actively discourages them from making concrete financial plans to fund their retirement. Instead, they count on a potential cash windfall to clear their mortgage and leave them with extra disposable income for superannuation payments and investments to fund their golden years. The study also found that those who had a financial advisor were less likely to be counting on an inheritance to solve their future for them. It seems financial planners act as a kind of reality check, forcing people to honestly assess their financial position and their real prospects of a future cash injection, and to make their plans accordingly.
Retirement planning was a long way from the minds of many respondents to the survey; the majority of which were far more committed to a comfortable lifestyle now than a secure retirement in the future. If they truth be known, the current senior generation are very liely to disappoint their hopeful offspring with what they leave behind. The mean inheritance in Australia peaked 10 years ago, back in 2006, at $109,285. By 2010 it had dropped to $87,672.
Why is this? Well, many Baby Boomers have been assisting their children their entire lives, via tertiary education, house deposits and other such cash injections to help them get by and to succeed in the world. Now, as they age, they need the proceeds from their house sales and their superannuation funds for themselves, to fund their own retirement.
The IPOS-MLC study illustrated that Australians are showing high levels of denial about their real financial needs for retirement. The knowledge of a financial advisor is more likely to secure a prosperous future than the uncertainty of waiting for an inheritance windfall, with all of its attendant grief and sadness.