Purposeful planning key to retirement confidence: Vanguard

A new study conducted by Vanguard has revealed that Australians with a clear retirement plan have the highest levels of confidence about their future.

The report, which surveyed over 1,800 working and retired Australians, found that retirement confidence was strongly linked to having a purposeful plan of action, not just one’s age or income. 

This included seeing a financial adviser, having a detailed plan and making extra superannuation contributions on a regular basis, Vanguard outlined. 

Over 50 per cent of participants who expressed high confidence levels regarding their retirement readiness felt they knew what they needed to do to achieve their desired retirement outcome. 

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Moreover, they were optimistic about this period of their lives, were likely to implement budgets and prioritised their savings. 

“One of the key findings in this report is that having a plan is one of the most effective ways to not only achieve a successful retirement but to alleviate the emotional burdens and anxieties that Australians can feel towards retiring,” said Daniel Shrimski, Vanguard Australia’s managing director. 

Those who were the least prepared for retirement exhibited the lowest confidence. These individuals were likely to have never accessed financial advice, had minimal understanding of how to achieve retirement goals and were expected to rely on the age pension.

In addition, Australians with the lowest readiness on average were less likely to make regular super contributions and were more disinterested and anxious about their retirement.

Just 27 per cent of older participants who had taken fewer steps to prepare felt optimistic about retiring, while 23 per cent were very confident. 

Younger Australians were typically confident about their retirement, but this tended to wane as they aged and went longer without a retirement plan.

“For younger Australians who are redefining the traditional path towards retirement with career breaks, parental leave and travel, having a plan is paramount to ensuring these pauses in paid work don’t impede their ability to accumulate enough superannuation and save for retirement.”

Two in five working-aged Australians expected to take some form of extended career break between their 20s and 50s, with half of Australians aged under 35 expecting to take parental leave. 

Impact of financial advice

The study additionally demonstrated the positive effects of advice on perceptions of retirement readiness. 

“While financial information is abundant, this study shows a positive relationship between professional advice and purposeful preparation for retirement, and ultimately [leading to] greater retirement confidence down the line,” the manager director continued. 

Nearly two in three working-aged individuals had never seen an adviser. Of this cohort, 75 per cent reported not feeling confident about funding their retirement. 

However, 44 per cent of those who had received advice indicated they were extremely or very confident about their retirement funds. 

Attitudes towards super

Half of working-aged Australians considered super a crucial part of their retirement plan but expected to rely less on it than current retirees. 

Investment property was an increasingly important aspect of one in four Australians’ retirement plans. Comparatively, only one in 10 current retirees listed this as an asset. 

Despite super’s importance to 50 per cent of working-aged Australians, 25 per cent were unsure what their current balance was, along with half who were unaware of how much they paid in annual fees.

The report also uncovered that half of working-aged Australians had either not made contact with their super fund in the last year or had no contact at all. 

Overall, the data led Shrimski to believe that Australians displayed low engagement and understanding about their super.

“An opportunity, and perhaps a need, therefore exists for the superannuation industry on the whole to improve member engagement, to simplify fee structures, and to support stronger retirement outcomes.”