The runway to real retirement success
In sifting through Australian Bureau of Statistics (ABS) survey data some years ago, it became apparent that the Australian retirement dream had a reality problem.
The ABS data presented a puzzling fact: there were a lot of people who were retiring in the first wave of a survey and then were back out looking for work in the next.
That equated to almost 200,000 Australians returning to the job market after their first attempt at retirement - most of them pushed by financial pressure (43%) or pulled by boredom (35%).
Why were people leaving work at the wrong time?
Rather than filing the ABS data as interesting, if non-actionable, evidence of retirement regret among older Australians, my research team and I decided to dig into it further.
Based on a review of psychological research on why people retire, including some of my own prior studies, the findings suggested that while financial status remains important, career, emotional, physical and social factors also played a significant role in workplace exit decisions.
Not enough people seek advice and their workplace exit date is often determined by access to their superannuation or pensions, without fully understanding how their funds will support their lifestyle. Even if they do get financial advice, what appears to be missing is a broader conversation about why they want to leave work or when they expect to leave, beyond the financials.
This insight triggered an idea for a new research project to determine if a more multi-disciplinary approach to retirement planning could better prepare Australians for life after work; spurring the formation of a Macquarie University-coordinated study in collaboration with Allianz Retire+, UNSW and the University of Western Australia.
Our research team was tasked with wondering what would happen if, instead of just getting people to get financial advice prior to retirement, they were helped with career advice first, then offered some insights into their health status - all before they sought financial advice?
Would it make a difference?
CONFIDENCE BOOST ON HEALTH, WEALTH AND CAREER TRAINING
The short answer to that question is ‘yes’.
Preliminary results from our Australian Research Council Linkage pilot completed in late 2021, confirmed that guiding pre-retirees through a structured program covering career, health and finance made a measurable impact on retirement-readiness.
The preliminary research found the three-pronged advice approach left people more confident about retirement overall while boosting their financial literacy knowledge.
Intriguingly, after completing the intensive three-module course – a mix of online and one-to-one advice activities – participants on average revised down their expected retirement ages.
The pilot experience demonstrated that when people explored beyond just the financials and started to really consider their individual circumstances and what it meant to retire or when they would like to do so, there were many ‘aha’ moments.
That is not to say the financial information was not high on the appetite list. Quite the contrary, finances in retirement could present a lot of unknowns or uncertainty for people and many were keen to develop a better handle on their knowledge.
In another significant preliminary finding, people in the pilot study said they were more likely to consult a professional financial adviser after completing the modules. Participants received a mixture of exposure to financial education, resources and general advice as part of the finance component, which might have added to the general uptick in willingness to seek advice.
In my experience, people are unsure how to go about finding a financial adviser and often have little idea of what questions to ask financial advisers about retirement planning. However, the pilot showed the in-depth retirement planning module approach enabled people to think more deeply, and reflect upon their individual situation.
This also has the potential to create engaged clients for financial advisers: those involved in the study generally emerged with a much clearer idea of what to expect from advice and along the way generated more specific questions to ask.
Overall holistic approach to post-work planning is indicating benefits both for retirees and advisers, with the potential to take flight across the industry.
STUDY CLEARED FOR NATIONAL APPROACH
Equipped with some interesting results based on the experience of 100 or so subjects over a relatively short time frame, we will commence the longitudinal national study in March.
The progress of hundreds of participants aged 50+ and still working will be tracked over an extended period, as they go through the holistic retirement planning program and beyond.
Indeed, aside from building more detailed evidence on how holistic advice can improve retiree outcomes, the study also targets developing an innovative approach to retirement planning training.
This type of training for financial advisers will mean translating the theoretical promise of the multi-disciplinary retirement planning program into a workable advice solution.
Financial planners who take part in the study to offer general financial advice will be rewarded with training and CPD credits of course. But above that, given the positive feedback from those in the pilot program, they will gain insight into the value and mechanisms of holistic advice.
Who would not want more pre-retirees coming to their practice, better prepared and showing greater engagement?
ACHIEVING REAL RETIREMENT SUCCESS
The promising initial indicators show that a broader approach to retirement planning – covering health and career details as well as finance – may offer a real solution to ensuring people adjust to retirement.
Participants certainly tended to have better knowledge about accessing their superannuation after going through the program, while also being more willing to confront health issues and perhaps giving themselves a reality check about when they may need to leave work. That can only be a positive.
With an overarching design to help people better engage and gather a realistic view of their individual circumstances, the study has the potential to increase confidence and spur active design of people’s individual retirement experience.
Financial advisers who are interested in taking part in the next phase of the study need to be listed on the ASIC Financial Adviser Register, have experience in dealing with retirement issues, be willing to go through training on the protocols of the holistic advice study and have time to connect with study participants for a general advice session.
We view this as a landmark study, with the potential to greatly impact Australians on an individual level, and offer broader societal and economic benefits.
It’s well worth deeper exploration.
Professor Joanne Earl is a Professor of Psychology at Macquarie University and a researcher focused on retirement planning and adjustment.
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