There is a significant gap between income expectations and the financial realities of a life in retirement, a new study from Schroders Global Investors has revealed.
The survey revealed while Australians expected to spend an average of 39 per cent of their retirement income on basic living expenses, they actually require around 58 per cent, and 61 per cent of respondents felt they did not have enough income or could do with more.
Respondents also predicted they would need 71 per cent of their current salary or income to live comfortably, while they only receive 52 per cent of their final working salary annually.
Global head of retirement, Lesley-Ann Morgan, said there was a real danger that people globally were underestimating the proportion of their retirement income that would need to be allocated to basic living expenses.
“There is no magic wand for people,” she said. “To avoid facing challenging financial circumstances on retirement, they need to recognise the need to start saving as much and as early as possible.”
Head of distribution, Graeme Mather, said it was reassuring to see that Australians were saving, on average, 12 per cent of their income for retirement, but said there was still a savings gap to overcome.
The study showed, however, that given the need for more income in retirement, retirees were continuing to invest.
Mathers said it was important that the retirement investment solutions available to retirees helped them meet their expectations and avoid surprises.
