Retirement and retirement intentions

Retirement trends

The HILDA Survey regularly collects information on retirement, including whether people are already retired and, if not, when they expect to retire. The figure shows, for each year of the HILDA Survey, the change in the average age of retirement of people aged 45 to 64.

For those who are not yet retired, the person’s expected age of retirement is used. We can see that both men and women on average retire, or expect to retire, some years before reaching eligibility for the Age Pension, which currently occurs at age 65 for both men and women. However, we can also see that people are retiring at increasingly older ages. In 2001, the average retirement age was approximately 61 for men aged 45 to 64 and 54 for women aged 45 to 64. By 2015, the average retirement age had increased to 63 for men and 61 for women.

Baby boomer surprise

Many people expected it, some feared it and a few prepared for it, but the baby boomers took everyone by surprise. They decided not to retire.

The increase in the proportion of workers aged over 60 has many policy makers in overdrive - the big question is when will the baby boomers retire? Traditionally the process of retirement has been viewed as an abrupt change from working continuously in a full time job to leaving the labour force completely. Today, the transition into retirement is much more diverse with more people making the transition gradually.

Research using Household, Income and Labour Dynamics in Australia (HILDA) study data has found that although 60 percent say they intend to retire gradually, many don't switch to transitional jobs, and those that do, around one-third switch back to more demanding jobs.

You're helping shape our nation

The PM uses Living in Australia to guide policy on pensioners.

It may be hard to imagine how the information you generously provide year in year out helps to shape our nation, but that's exactly what it does.

One of the major policy issues that the Australian Government has been wrestling with is the impact of cost of living pressures, especially on Age Pensioners. Understanding and measuring such pressures is one of
the many objectives of the Living in Australia study.

The Prime Minister told parliament that as a result of this study we now 'have clear-cut data on what was happening when it came to elderly couples' (extract from Hansard, Monday 15 September 2008). The Living in Australia data is now being used to guide the Government's recent review of the pension system.

Retirement intentions

All employed persons aged 45 years or older were asked about their plans for retirement. A summary of their responses is provided in the table below and is suggestive of relatively widespread preferences for retirement at what traditionally have been thought of as young ages.

Approximately 34 per cent of all older employed men and 41 per cent of older employed women nominated a desire to retire (permanently) from the workforce by, or prior to, their 60th birthday. Furthermore, this estimate represents a bottom limit given about one in four workers in the age groups under consideration were unable to nominate a preferred age of retirement. It is true, however, that the most nominated retirement age remains the more conventional 61 to 65 year age range.

Intended Retirement Age by Sex (%):
Employed Persons Aged 45 Years or Older

Perhaps more importantly, the types of workers who are intending retiring earliest (at or before 60 years of age) tend to be more highly paid, and presumably most highly skilled. This can be seen in the next table, which reports average current annual earnings by intended retirement age.

Such findings are of potentially large significance given the widely held view that population ageing will require policy interventions to encourage people to extend their working lives beyond conventional retirement ages.

Intended Retirement Age by Sex and
Average Current Annual Earnings ($):

Retirement plans

There is currently considerable discussion about how Australia will support its aging population.

The Commonwealth Government has set a number of objectives relating to how people can be encouraged to plan for their retirement.

In 2003, the Living in Australia study included questions on retirement for those aged 45 and over. Your answers to these questions provided valuable input into the understanding we have of the issues surrounding retirement. Some of the results from these questions are shown below.

• Most people in our study aged 45 years and over, and still in the workforce, expected to be retired by age 65 (75%).
• More said they would choose to retire earlier if they could afford to do so - 81% by age 65.
• The large majority of people already retired reported receiving the Age Pension, and in most cases the full pension.
• Relatively few (37%) aged 45 and over, and who were not yet retired, expected to rely on the pension as their main source of retirement income.
• Almost 60% thought their retirement income would be sufficient to maintain their current standard of living. Another 10% thought it would be more than enough, leaving 34 % who believed they would be worse off.

People in retirement

People who were already retired seemed satisfied with their situation. Most said they 'enjoyed being retired' and were 'well adjusted to the changes following retirement. Once retired, they did not feel that people respected them less than before.

In terms of their financial situation, 52% said that they had about the same standard of living as when they were working, 21% saw themselves as better off, and 27% said they were worse off.

Standard of living of retirees compared to when they were working