Shy from retiring

PORTFOLIO POINT: Be careful what you wish for. Early retirement isn’t all it’s cracked up to be say those who’ve beaten the rest to it.

Human behaviour can be quite bizarre. I think we all know that. There are plenty of things that we do that don’t make a lot of sense. Top of mind is Oprah-mania. Wow! Is she really that good?

While regret itself isn’t necessarily strange, it can be very unusual.

Humans as a race regret a lot of things we didn’t do. There’s one saying that seems to have become a truism – a self-evident truth; something that’s just right and we shouldn’t question it. And that is, on our deathbed, we apparently all think: “I wish I’d spent less time at the office and more time with the kids”.

I’ve got a couple of young ones (two and four years old) and a young-ish business.

So I’m in a position to be lectured, rather than to lecture on that front. At the moment, I’ll skip both, thanks very much, because any of your comments will, sadly, fall on deaf ears. (There are two imperatives and I’m doing my best balancing act.)

But a new survey has apparently revealed another “truism” – which although is contradictory to the one I’ve just revealed in some ways – makes perfect sense in others. And it’s not a minor regret. It’s pretty serious.

Global wealth manager and life insurer AXA recently released its 2010 Retirement Scope survey, of the retirement expectations of citizens from 26 countries. It suggests that working Australians would like to be able to retire at age 59, on average. But most of them believe they will have to work through until 64.

That’s not the surprise. The surprise is with those who have retired. The average age of retirement for those in the survey was 58. But when asked “at what age would you have liked to have retired?” the respondents said 61.

That’s pretty significant. That means that Australians wish, on average, that they had stayed in the workforce for another three years. They regret finishing early; they wish the had worked longer.

From a young age we are taught the big life stages are “getting married”, “buying a home” and “having children”. “Retiring early” is the fourth pillar. But it turns out that we don’t really want to retire early.

Or maybe just not as early as we think.

AXA’s survey team suggests this could have been because retirees quickly find that they have too much time on their hands. And that could well be a significant reason.

But let’s not forget that this survey was conducted in the first half of 2010; we were just a year from the bottom of the stockmarket that had dramatically altered the retirement plans of almost everyone living off their superannuation.

There were a lot of people who, in the year prior to the survey being conducted, would have been wondering whether they still had enough money in their super fund. If only they had worked another three years '¦

This thinking is backed up by some of the surrounding stats. In the three years since the survey having been done last, the expected age of retirement has risen from 62 to the 64 mentioned above, after having been steady at 62 for three consecutive surveys.

Even the age at which people would like to retire had risen from 57 to 59 between surveys (it wasn’t asked previously to the last two).

Among the retired, the actual age of retirement had risen from 57 to 58 over the same period and the “ideal” retirement age had gone from 60 to 61.

Coincidentally and interestingly, in another survey released around the same time by Mercer, it is suggested that delaying retirement by two years can add five years to your superannuation, through a combination of continuing to contribute for two extra years and not drawing for that period.

“This is a particularly important message to send, given that Australians already feel underprepared for retirement,” Mercer’s 2010 Superannuation Sentiment Index declared.

There were a few other interesting findings from AXA’s retirement scope, particularly as they related to superannuation.

AXA claims that its survey showed that “most” Australians waited until they were 55 until they started to plan for retirement (though the “average” Eureka Report reader would no doubt start considerably earlier than that).

About 46% of Australians support the government lifting mandatory superannuation payments. Compare that to the US, where just 17% gave support.

About 48% of Australians rely on the government age pension, compared to 93% in France and 89% in Spain.

And, given that Labor announced at the last election that it would be lifting the government age pension access age from 65 to 67, they might be interested to know that only 5% of Australians support that. In France, where they had weeks of riots over this exact issue, the French government has support at 11%.

The message seems to be getting out slowly that Australians are not going to be able to retire on their superannuation at the time of their life that they thought they would be able to. And learn a lesson from those who are already in retirement, who seem to be saying: “It’s a little over-rated. Stay out there on the land of the employed for a few more years”.

Bruce Brammall is director of Castellan Financial Consulting and author of Debt Man Walking.