Why aren’t those “down under” feeling better about retirement?
The Australian pension system has been widely touted for years as an example for the United States, if not the world, to follow. With their mandatory employer contributions of 9.5% per worker (albeit on their way to 12%), the MEP-like investment structures of the Australian Superannuation funds, limited pre-retirement withdrawals, a robust advisor infrastructure and the ability to make additional voluntary (tax-preferenced) savings as well, what’s not to like?
Apparently, somebody needs to tell that to the Australians, because a new survey finds that Australian in-plan savers reported lower confidence about their retirement prospects, even though they are contributing at higher rates than U.S. counterparts. Moreover, Australians reported saving 41% more for retirement.
Among U.S. investors participating in an employer-sponsored retirement plan, more than half (51%) of these “in-plan savers” now feel extremely or very confident about their retirement readiness, up from 36% last year, according to State Street Global Advisers 2015 Retirement Survey. As recently as 2013, only about one-in-five (21%) of respondents felt as confident about retirement.
‘Down’ Down Under
However, in Australia, only 32% of respondents are highly confident in their retirement prospects. Average household income for respondents in Australia was $66,000, compared with $107,000 in the U.S, according to the survey, and yet the average investable assets for Australian respondents totaled $349,000, compared with $247,000 in the United States. Said another way, while Australian respondents earned 38% less than their American counterparts, they saved 41% more, on average.
Although only a minority of worker respondents had established an advisor relationship, those who had tended to feel the most optimistic about their financial future. On the other hand, this group was also the most affluent, so higher confidence might well be the result of higher income and asset levels.
The survey found that U.S. plan participant confidence is influenced by a number of factors, including:
- Being knowledgeable about how to plan and set goals (54%).
- Having retirement planning tools like savings checklists and online planning tools (45%).
- Understanding how to “invest appropriately.”
However, the survey’s authors found a significant gap between those who report having invested appropriately (66 %) as a top reason and those who feel knowledgeable about investing (36%) as a top reason.
U.S. participants who aren’t confident cite having not saved enough (80%) and having other financial priorities (44%) as the contributing factors.
Oh, and as for Australian retirement confidence, the report cites the recent drop in global commodity prices, since the nation is a major commodities exporter.
The survey was conducted in partnership with TRC Market Research and Rice Warner. Data were collected in May 2015 through a 12-minute Internet survey using a panel of 3,652 retirement savers, aged 22 to 81, who were working at least part-time and participated in retirement savings plans, either with or without the guidance of a financial advisor.
