Schroders Global Investors’ recent study found that savers around the world think they’ll need 74 per cent of their current annual income to live comfortably in retirement. However, the average final salary is 61 per cent of what they received while working.
For Australians, this gap is even more pronounced.
Non-retired Australians of at least 55 years predict they will need 71 per cent of their current salary to lead a comfortable retirement. However, the actual income Aussie retirees receive is on average 51 per cent of their previous salaried income.
“There is no magic wand for savers,” Schroders global head of retirement Lesley-Ann Morgan 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.
“Leaving retirement saving until you are nearing your 50s and 60s is likely to be too late to make up a savings gap.”
Around the world, the expectation gap was largest for those with little investment knowledge.
“Those reporting a higher level of investment knowledge are more likely to feel comfortable in their retirement than those with beginner or rudimentary levels,” the report noted.
“Even so, 40 per cent of retired people with high levels of investment knowledge say they could do with more income.”
The cost of living in retirement also comes as a nasty surprise to retirees.
Australian pre-retirees anticipate they will spend 39 per cent of their retirement income on living expenses. However, the reality for retirees is that 58 per cent is swallowed up.
Despite these gaps, retirees consider their income sufficient. Only 15 per cent of global respondents said they don’t have enough to live on comfortably, although 58 per cent do want more.
For Australians, 85 per cent of retirees consider their income sufficient but 63 per cent believe they could do with more.
Retirees in India (99 per cent), Indonesia (98 per cent), Austria (95 per cent) and Taiwan (95 per cent) were the most likely to consider their income sufficient, while South Korean (45 per cent), Russian (48 per cent), Chilean (60 per cent) and Polish (60 per cent) retirees were the least likely to feel they had sufficient income.