How will Australians retire?

As Australia’s population ages and ‘baby boomer’ retirements head toward their zenith in 2025, a discussion on the Retirement Risk Zone, that is the 10 years leading to retirement, is timely.

By

As Australia’s population ages and ‘baby boomer’ retirements head toward their zenith in 2025, a discussion on the Retirement Risk Zone, that is the 10 years leading to retirement, is timely.

The importance of the discussion is heightened by Australia having one of the highest allocations to equities and the smallest aggregate allocations to fixed income in the world, with the small allocation to fixed income even more pronounced in the SMSF sector at just 1.2%.

This report, the 7th in a series written by the Australian Centre for Financial Studies (“ACFS”) and commissioned by NAB, asks whether the risk of capital loss in retirement portfolios is adequately compensated by the potential for capital gains and/or dividend yields in the final 10 years to retirement.

To answer this question, the ACFS study uses a unique data set to extrapolate financial wealth at retirement by running three simple asset allocation models – 100% equities, 100% fixed income investments and 50/50 of each.  The report finds it is the impact of contributions to superannuation savings which has the most impact on household financial wealth rather than investment returns.  The impact of asset allocation on increasing financial wealth is more muted.

The report highlights the need for continued development of Australian Corporate Bond market – through education, more products and improved access for investors.

To find out more download the full report:

Explore previous reports from the ACFS: