According to the professional services firm KPMG, Australians are retiring at an average age not seen for over 50 years.
That’s due in part, apparently, to more 55+ year olds remaining in the workforce during the COVID pandemic. Indeed, one in every five members of the workforce is currently aged 55 and over and it doesn’t look like that figure is going to reduce any time soon.
Terry Rawnsley, who works as an urban economist for the company, recently revealed that the average retirement age in 2022/23 for women was 64.8 and men 66.2. Both are the highest levels recorded since 1971 and 1972 respectively.
During an appearance on ABC News Breakfast, Rawnsley even posited that many older people during the COVID-19 era were forced to put their retirement travel and lifestyle plans on hold. Subsequently, choosing to keep working in order to maintain a level of social interaction and human contact.
So what does this mean for senior Aussies?
In this article, we will take a look at this question in more detail.
Growing Labour Force
During the period of 2019 to 2021, the labour force in Australia increased to the tune of 185,000 workers. Of them, over 70% (127,000) were aged 55 or over.
However, as international migration returned and more Aussies under the age of 55 secured employment, the presence of over-55s in the labour force had dropped to 21.3% by 2023.
Back in 2003, the average age of Australian women who retired was 61.6, some 3.2 years before the women of today.
By contrast, men retired, on average, at 63.3, just under three years (2.9), earlier than at present. Interestingly the age gap between when men and women retired on average has stayed similar despite the passing of time.
One reason for this could be because the behaviours of both women and men in the labour market have become more in sync. Previously, women were able to retire early than men because they were able to access their pension at a slightly younger age.
Rawnsley went on record as saying that as men and women can access their pension when they reach their ‘preservation age’, the figures are likely to converge in the near future.
Reasons for Growth
So why is the labour force growing among the over 55s?
Here are some of the main factors driving this increase that the study found.
1. Geographic Location
KPMG’s study also revealed that where you live had a slight influence on your retirement age.
For women, Perth had the highest average age for retirement in the country at 65.5, while for men, Melbourne came out on top with 66.8.
This is compared to Brisbane, which came out lowest for both women and men, respectively, at 64.8 and 66.4 years old.
Rawnsley suggested this might be due to the labour market being tighter in Melbourne and Perth and a trend for people in Brisbane to seachange to the Gold Coast or Sunshine Coast.
2. Semi-Retirement
The study also found a rise in semi-retirement which is seeing people reduce the number of days or hours they work.
According to Rawnsley, there was sizeable evidence that people were leaving the workforce to pursue hobbies such as playing golf or gardening, only to get bored with the excess amounts of free time they have and yearn to return to the workforce on a part-time basis.
3. Career Change
Another reason that older Australians remain in the workforce for longer is because many are consciously changing their careers later in life and, therefore, feel they have more still to achieve on a professional level.
The days of people staying in one industry, let alone a job for 30 to 40 years, are long gone. Instead, Gen X has grown up in a time where it is perfectly acceptable to have two or three completely different and unrelated careers in your working life.
As a result more older Aussies than ever want to test themselves in a professional sense, resulting in them seeking fulfilment and challenges, they might not otherwise have sought.
4. Income Generation
Remember that phrase ‘life begins at 60s’?
Well, while this was initially coined to encourage people to live frugally and focus solely on working, many Aussies are determined to live their best age now – however old they are.
People tend to go out to eat, treat themselves to new purchases and spend more money on entertainment than they arguably ever have.
Moreover, with the rising of technology fuelling the desire for ‘much have’ items like streaming services, digital devices and other lifestyle products, people having saved up as much in their super as Aussies did from even 20 years ago.
5. Rising cost of living
The cost of living is at levels never before experienced.
The average mortgage size for an owner-occupied home is $615,000 in Australia, while the median rent is $601 a week. Petrol is regularly around $2 per litre, and Tim Tams are often sold for over $4 a packet!
For many Australians, they simply feel like the cost of living is too high for them to retire just at the moment. Which is why they choose to remain in the workforce a little bit longer.
6. It is easier than ever to stay in the workforce
Depending on the job they do, many over 55s are staying in the workforce because it is easy to do so.
This is especially true for white-collar workers who use computers for their work, particularly as many companies allow you to work remotely in some capacity.
7. Later access to Superannuation
Another factor why Aussies are remaining in the workforce until a later age is that due to recent changes by the government, they can no longer access their Superannuation at the age of 55, but now have to wait until they are 60.
Official Retirement Age and Pension Access
Recently, the government made some changes to the official retirement age and pension access.
As a result, Aussies will have to wait until the age of 65 to access their superannuation if they are still working and 67 to access their pension from Centrelink.
Whilst this news was received much better than in France, when changes made by the government led to riots, there is some concern among advocates for seniors.
The trend over the last 20 years showed a 0.1 year increase in the retirement age for each year. This means that if the trend continues, many older Australians might be working until they are 70 years old.
However, while a few see this as a negative, Rawnsley points to some positives of working for a longer period of time. Principally this involves making more money for longer, which will push back the need for accessing your age pension.
It also might reduce some of the burden placed on the younger members of the work force whose taxes will otherwise have to cover the pension base of retirees.
Final Thought
Whether the retirement age actually pushes up to 70 by the year 2044 remains to be seen.
However, with the average age currently projected to be 85 years for men and 89.7 for women at that time, there is a good chance that you will have to fund between 15 and 20 years as a minimum of your retirement.
Therefore, maybe we shouldn’t be fixating on how old we will be when we retire, but rather how much money we will have at the age we finally decided to stop working.
