Most people assume retirement will be a one-time event, with no expectation of ever returning to work, but new research shows that is often not the case.
The latest report of the Household Income and Labour Dynamics in Australia Survey (HILDA), which has been run by the Melbourne Institute since 2001, shows that in the years up to age 59 as many as 26.7 per cent of people come out of retirement and return to the workforce each year.
And for retired men aged 60 to 64, at least eight per cent come out of retirement each year. The figure for women in the same age group is 6.9 per cent.
The report also reveals that there is a general trend towards later retirement for both men and women, and most people retire later than they would like to.
For men, the mean age of retirement has increased from 62.1 years in the four years up to 2003 to 66.1 years in the four years up to 2015.
For women, the increase in the mean age at retirement is only evident from 2007, when the mean age was 61 years. The rise after 2007 is more rapid than for men, rising to 63.8 years in the four years to 2015.
There has also been an increase in the age at which people expect to retire. For example, among those aged 50 to 54 in 2003, the mean expected retirement age was 60.7 for women and 63.1 for men, while among those aged 50 to 54 in 2015, the mean expected retirement age was 64.2 for women and 65.4 for men.
The mean preferred retirement age was lower in all cases than the mean expected retirement age, although this has also increased over time. For example, the mean preferred retirement age of women aged 45 to 49 rose from 55.1 in 2003 to 58 in 2015. The mean preferred retirement age of men aged 45 to 49 rose from 56.7 in 2003 to 58.6 in 2015.
The report says: “Relatively few people are observed to retire at exactly the age they expected. Even among those aged 60 to 64, most of whom would have been quite close to their expected retirement age when surveyed, only 16.6 per cent of men and 6.5 per cent of women retired at the age expected.
“Even at older ages, expected and actual retirement ages diverge considerably for the majority of people. In most cases, a greater proportion retired later than expected.”
The survey found that the timing of retirement is likely to be determined by a number of factors, including financial readiness for retirement, health, employment opportunities, individual preferences and the desire to co-ordinate with one’s partner.
Poor health is one of the most commonly reported main reasons for retirement. Of those who retired between 1999 and 2003, 31 per cent identified poor health as the main reason. However, over time poor health has been cited less frequently as the main reason for retirement.
A spouse’s poor health does not have a significant effect on the retirement but the death of a spouse increase the probability of retirement.
Retirement might be expected to become more likely when there are fewer employment opportunities but there is no significant effect from labour market conditions.
Life events also play a role. Men with a bachelor’s degree retired 1.4 years later then men who had not completed high school. Women with a bachelor’s degree retired 4.7 years later then women who had not completed high school.
Men who had ever married retired 3.3 years later than men who had never married, while women who had ever married retired 5.4 years earlier then women who had never married.
Other main reasons given for retirement include “voluntary – family/life reasons” and “voluntary – financial reasons”. The superannuation system is beginning to mature, such that a significant proportion of people are now entering retirement with substantial superannuation balances.
For people who retired between 2011 and 2015, among those with superannuation at the time of retirement the mean balance was $454,221 for men and $230,907 for women. The median balances were $325,000 for men and $110,952 for women.
Of those who had superannuation when they retired, 52.1 per cent of men and 67.7 per cent of women converted at least some of that superannuation into a regular income, such as a superannuation pension or annuity. These retirees tended to have larger superannuation accounts that other retirees with superannuation.
Two-thirds (67.8 per cent) of men and 81.3 per cent of women did not convert all of their superannuation to a regular income stream.
Significant proportions used superannuation to invest elsewhere, pay off debts and pay for large expenditure items, such as renovations, motor vehicles and holidays.
The report says: “It seems that a significant proportion of people with relatively low superannuation balances at the time of retirement are making the decision not to use their super to help fund their retirement. For example, the mean superannuation balance at retirement of men who used their super to pay off debt was $235,978 and on average 58.2 per cent of their total super balance was used to pay off debts.”