• 27% of retirees cutting back on food shopping expenses
• 37% of retirees spending less on clothes
• 20% of retirees looking to increase savings
• 65% of retirees concerned about income in retirement

New research conducted by investment management firm Challenger, in light of its new Retire with Confidence Tool, examined the financial wellbeing of older Australians.* The study revealed over a quarter (27%) of retirees were cutting back on their food shopping costs and more than a third (37%) were spending less on clothes and accessories due to concerns about what COVID-19 may mean for their future finances.

Moreover, one in twenty (6%) retirees plan on cutting out travel and holidays. One in five (20%) retirees were looking to increase their savings. Worryingly, almost half (49%) of retirees don’t feel confident about their financial security over the next five years.

In light of the economic downturn caused by the COVID-19 health pandemic, almost all adults questioned** are concerned about the Australian economy (97%), more so than their own health and wellbeing (81%). Four in five respondents (80%) were concerned about their personal financial security in the future. 

Challenger’s Chief Executive, Distribution, Product and Marketing, Angela Murphy, said: “These results show the impact of COVID-19 on our economy has caused significant stress among Australians, affecting their mental and financial wellbeing. 
 
“Sixty-five percent of retirees are concerned about their income during retirement, and 57% said they plan to make changes to their finances. Due to feeling uncertain about the future, unfortunately for many this means they are cutting back on necessities like food and energy bills.” 

Other key findings from the research found: 

• Respondents, both retirees and non-retirees, were analysing their everyday spending to alleviate financial stress. Those who are making changes are focusing on reducing expenditure on clothes and accessories (46%), making changes to energy bills (12%), and amending insurance plans (9%).
• Almost two-thirds of retirees (65%) showed concern for their income through retirement.
• Amid glum unemployment reports, three-quarters of Australians surveyed were worried about their family or friends’ job status (77%). 
• Retirees showed lower confidence in the long term (5 years), suggesting uncertainty about the longer-term impact on their retirement plan. 

Despite overall concern around the economy, only half of respondents (retirees and non-retirees) have taken, or are planning to take, action to address their current financial concerns (54%). 
 
In fact, of those who expressed serious worries for their financial wellbeing, nearly a third of respondents indicated they haven’t done anything to alleviate their concern about their financial security (29%).

Murphy said: “This survey showed only a third of respondents have sought help for their finances, and of those, only 1 in 5 went to a professional financial adviser during this time. 

“We know from our previous research in this area that when people feel overwhelmed by their financial situation they tend to stagnate because they find the choices too complex or they simply don’t know how to take the first step.

“It’s for this reason, Challenger has launched Retire with Confidence, a new tool for Australian retirees and people considering retirement to help educate them on their retirement income options. 

“The Retire with Confidence Tool helps Australians aged 60 to 80 understand how long their retirement income might last and the amount of Age Pension they may be eligible for. The tool also shows how including different types of investments and sources of income, such as a lifetime income stream, could improve their financial outcomes.”

She added: “The coronavirus pandemic has put retirement income in the spotlight and many older Australians are evidently questioning the confidence they previously had about their financial situation and what this might mean for their retirement plans over the longer term.

“Planning for retirement can be complex with a range of risks and options to consider. We hope that this tool helps to build confidence and understanding about income options in retirement for retirees.” 

The Retire with Confidence Tool is available at www.challenger.com.au.

*The research was commissioned by Challenger and conducted by Lonergan Research in May 2020 in accordance with the ISO 20252 standard. Lonergan Research surveyed 1038 Australians aged 40+.  

**Australians aged 40 and over as per the research sample.

Key facts:

• There are currently more than 3.85 million Australian retirees (Source: ABS)
• The average age of retirement for current retirees is 58 (Source: ABS)
• Of those who retired in the past 20 years, 19% retired due to economic conditions or lack of employment; and 29% due to illness or caring responsibilities (Source: ABS)
• The average household wealth at the point of retirement is $680,000 (Source: ABS. Includes superannuation and non-superannuation assets)
• Australia is the world’s fourth largest pension market (Source: Willis Towers Watson Global Pension Asset Study 2020) 

About the Retire with Confidence Tool 

Co-designed with retirees and pre-retirees, the Retire with Confidence Tool helps older Australians who are already retired or considering retirement in the next two years understand how long their retirement income might last and the amount of Age Pension they may be eligible for. The tool also shows how including different types of investments and sources of income, such as a lifetime income stream, could improve their financial outcomes.

For more information contact:

Enya Pelling
FleishmanHillard
0423 727 896
Enya.pelling@fleishman.com.au