Aussies remain 'positive' about retirement: Challenger

Despite a slight improvement in retirement sentiment, Challenger believes better access of financial education among older Australians, particularly regarding lifetime income stream strategies, will be beneficial to retirees.

The third annual Challenger Retirement Happiness Index, which surveyed over 2000 Australians aged 60 and over, found overall happiness remains strong, with this year's index (69.5) climbing a little higher since last year (68.9).

But the rising cost of living continues to impact lifestyle, financial security, and confidence in whether money will last.

The top priority for close to half (44%) is to have enough money to enjoy retirement, with nearly four in five (76%) saying they would be much happier if they had a guaranteed income for life in retirement.

Yet Challenger identified a clear knowledge gap persisting, with more than half of them (59%) no knowing about, or having not heard of, lifetime income streams as a financial strategy for retirement.

This comes as one in three Australians (30%) say they would be happier in retirement with greater financial education, with 39% wanting paid education provided by a financial adviser to building financial knowledge and boosting retirement happiness.

Challenger chief executive, customer Mandy Mannix said the findings reinforce that the shift to decumulation requires comprehensive support.

"After decades of savings, we are asking retirees to do something that feels completely counter-intuitive - to start spending. That change requires financial guidance and support," Mannix said.

"Older Australians want a guaranteed regular income in retirement to help manage day-to-day expenses that can provide financial security for life, but access and awareness remain key barriers."

This comes as the cohort continue to prioritise saving enough money for retirement (72%), covering health and aged care costs (65%), and maintaining their lifestyle (53%).

But the cost-of-living pressure continues to undermine retirement confidence for the third consecutive year, as two in three (67%) believe inflation and cost of living are the most important thing to account for in retirement.

According to the latest Association of Superannuation Funds of Australia's (ASFA) retirement standard, a comfortable lifestyle will require at least $54,840 a year ($1055 per week). However, respondents for Challenger's study believe the figure is actually much higher, which requires at least $70,398 or approximately $1350 per week in the same category.

Mannix said the higher prices reflect the "reality of living" on a set amount of money for the rest of their lives.

"The dollar value of a lump sum when you retire can seem like a lot of money, but it has to last a long time. It can be hard to know how much to withdraw, knowing that the purchasing power of $1 million today can halve in 20 years' time. The impact of inflation can be dramatic, and it is a real concern," Mannix said.

"That's the power of a guaranteed regular income. A 'paycheck' means retirees know their needs are taken care of giving them greater confidence to spend on their activities and hobbies that give them purpose and happiness in retirement."

The challenge is more acutely exacerbated for women, who often retire with less super.

According to the study, women (48%) are more likely than men (43%) to rank fear of running out of money in retirement as one of the top three things impacted by the rising cost of living.

"Today's retirees are the first generation having built significant superannuation savings. Yet, after decades of focusing on saving, many retirees find it surprisingly difficult to switch to spending once they retire," Mannix added.

However, the study also presented a positive trend - volunteers are turbocharging their retirement happiness.

"One of the strongest insights is the powerful role purpose plays in retirement happiness. People who volunteer, stay active in their communities, and maintain hobbies and interests consistently report higher levels of happiness," Mannix continued.

"It goes to show that retirement really can be the prime time of life. The key is to have the confidence and certainty to relax in those golden years, knowing your money will last and you can afford to enjoy all retirement has to offer."

Volunteers were found to be the happiest older Australians, with an average happiness score of 77 compared with 69 for those who do not. Married couples (72 vs 66 for unmarried) and homeowners (73 vs 60 for non-homeowners) also beat the benchmark, the survey found.