Over 80% of Generation X and Y Australians may not be able to afford a comfortable retirement, according to new research.
81.3% of people born between 1966 and 1994 – Gen X and Y – will not have enough saved for a comfortable retirement, finds the Griffith University Reinvention is the new Retirement report.
The research, which was commissioned by No More Practice Education, projects the ASFA figures for a comfortable retirement forward to 2043, when many in Gen X and Y will be retired or retiring. It finds that a comfortable retirement is likely to cost between $2.09 million and $3.98 million. Based on a “conservative” inflation rate of 2.5% per annum 81.3% of Gen X and Y will fail to reach this level of savings. When using Australia’s long term inflation rate of 5.07% up to 94% will fail to save this much ahead of retirement.
“Whilst these numbers represent our ‘worst case’ scenario analysed, they are a very real possibility we need to be prepared for – this low growth scenario has been the reality for countries like Japan for over 20 years,” said Professor Mark Brimble, who led the research.
Marcus Field, Managing Director of No More Practice Education, said the figures were a wake up call.
“It’s clear that we must take real ownership for our financial futures and do it now,” he said.
What happens to inheritances could make a big impact on retirement savings. The report found that over the next 20 years $3.5 trillion is likely to be transferred from the Baby Boomers to later generations. 75% of Gen X and Y will surviving parents will inherit over $110,000.
“110,000 invested well for 25 years could grow to be over $1 million, but it is also the sort of amount that could very easily be frittered on lifestyle. Getting people educated on how to invest that money for the long term is vital to all of our futures,” said Professor Brimble.