Retirement: A new vision in the face of change

As we approach the mid-2020s, retirement has transformed from a straightforward notion of leaving the workforce to a complex and evolving stage of life. Shaped by rising costs, shifting cultural perspectives, and longer life expectancies, the new retirement landscape presents both inspiring opportunities and serious challenges for Australians. Here’s a look at how these factors are redefining retirement, and what they mean for older Australians aiming to secure a fulfilling future.

The positive shift: A longer, more purposeful life

One of the most significant changes is that people are living longer than ever before. The average life expectancy worldwide increased from 48 years in 1950 to around 73 years in 2019, with predictions reaching 81 years by 2100. For Australians, this means that a person retiring today might reasonably expect to live another 20 or even 30 years post-retirement.

Living longer brings an incredible opportunity to pursue hobbies, spend time with family, travel, and even reinvent oneself through continuous learning or part-time work. The notion of retirement has expanded to include these possibilities, with many seeing this stage as an active period rather than a time of slowing down. Notably, the World Economic Forum (WEF) emphasises a “multi-stage life” that balances work, leisure, and lifelong learning, aiming to keep individuals healthy, financially secure, and socially connected.

The reality check: Financial pressures and delayed retirements

Yet, the lengthened lifespan also means increased financial demands. Many Australians face a retirement period that could span decades, often without sufficient savings or superannuation. With 55% of Australians aged 40+ unsure if they have saved enough for retirement, and only a quarter expecting to retire by age 65, financial anxiety is widespread. The 2024 Association of Superannuation Funds of Australia (ASFA) benchmark now suggests that a comfortable retirement for couples requires around $72,663 annually, a figure out of reach for those with limited superannuation or retirees relying on pensions alone.

The rising cost of living has added further strain, compelling some Australians to remain in the workforce beyond their anticipated retirement age. In fact, analysis shows that the average retirement age for Australians is now the highest since the 1970s. Inflation and other economic pressures have even led to a new trend: “un-retiring” or re-entering the workforce after initially retiring. This approach helps bridge financial gaps but can affect tax and benefit status, underscoring the importance of financial planning.

Housing and healthcare: Competing priorities

For retirees who are “asset-rich but cash-poor,” the family home represents both a comfort and a financial reservoir. However, tapping into this equity is challenging as many wish to age in place. According to the Australian Institute of Health and Welfare (AIHW) Older Australians report from 2021, nearly all Australians aged 65-74 live in private dwellings, illustrating a strong preference for maintaining independence. As we age beyond 74, we increasingly move into nursing homes and retirement accommodation, but mostly remain in private dwellings into our 90s.

Financial products such as reverse mortgages have become increasingly popular (recently experiencing a 20% increase in uptake year-on-year), offering a viable solution, allowing homeowners to access funds without selling their properties. This option offers a practical way for retirees to handle healthcare expenses, home modifications, or other unexpected costs while remaining in the homes and communities they cherish.

Additionally, healthcare costs are increasingly impacting retirement plans, especially with rising aged care expenses. Awareness of these expenses has extended beyond retirees themselves, with younger Australians—having witnessed the challenges faced by their parents or relatives—becoming more concerned about future aged care costs.

The complexity of early Inheritance: Balancing family and financial needs

Recent findings from the Australian Seniors Inheritance & Retirement Report 2024 reveal a growing trend of retirees planning to leave an inheritance while balancing their own financial stability. Nearly 70% of Australians over 50 intend to provide some form of inheritance to their children or grandchildren, with many considering early gifting. This decision is often fuelled by a sense of responsibility to support family amid economic challenges, with nearly 80% acknowledging that inheritance will require financial adjustments.

However, this choice is not without its challenges. Nearly 30% of those planning to leave an inheritance worry about the impact on their own financial security, as the pressures of rising healthcare and living costs mount. This concern highlights a delicate balance: while retirees want to help their children financially, doing so may risk their own quality of life in retirement. For those navigating these choices, early inheritance can provide family support, but it underscores the importance of a robust financial plan to ensure stability across generations.
Evolving perspectives: The traditional concept of retirement is fading

The traditional model of “education, career, retirement” is giving way to a more fluid understanding of life stages. With people living longer, many professionals, including leaders like Professor Lynda Gratton of the London Business School, argue that we should adapt to a reality where working into the 70s becomes the norm. This shift is not purely economic; many retirees are returning to work not only for financial reasons but also for social engagement and personal fulfillment.

In this new framework, retirement is not about “ending” but about adapting. Individuals are increasingly interested in finding purpose and pursuing passions, whether through part-time work, volunteer roles, or new learning experiences. This change also demands a proactive, long-term approach to retirement planning that considers potential healthcare costs, housing needs, and lifestyle adjustments.

The role of financial literacy and planning

Given the complexities of modern retirement, financial literacy is more important than ever. Yet, many Australians still lack the financial literacy required to navigate these decisions confidently. Financial resilience, particularly for those over 55, involves understanding how to utilise their entire portfolio of assets (including their home equity), manage superannuation, and consider innovative retirement income solutions.

A call to action: Embracing the future of retirement

Retirement in 2024 looks dramatically different from the expectations of past generations. For some, the golden years are expanding, filled with possibilities to travel, learn, and enjoy family. For others, financial realities may mean adapting to new ways of working and living. However, with thoughtful planning and innovative solutions, it is possible to navigate these changes with confidence.

As Australians adjust to these shifts, it’s essential to consider not just financial resources but also quality of life, purpose, and community. By embracing both the benefits and challenges of this evolving landscape, Australians can redefine retirement on their terms, crafting a future that balances freedom, security, and fulfillment.

Your Home Equity

At Your Home Equity, we recognise the emotional and financial intricacies of retirement. For older Australians, a reverse mortgage is often an overlooked solution that can ease financial stress without compromising the comfort of staying in the family home. As a niche provider in reverse mortgage solutions, Your Home Equity is here to provide transparent, personalised guidance that empowers Australians to take control of their retirement finances in a way that aligns with their values and life goals.