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Baby Boomers respond positively to market conditions

14 April 2008

Global financial market volatility has encouraged Baby Boomers1 to make changes to better save for retirement, according to a survey released today by the Commonwealth Bank.

The Bank’s Lifestyle Aspirations survey2 revealed that the global market situation has led more than three quarters (77 per cent) of respondents to make changes to better save for retirement. And of those, 56 per cent would seek the advice of a financial planner to help make decisions easier.

The survey found that despite 60 per cent of Baby Boomers expecting a better lifestyle than their parents and intending to live life to the full, fewer people than those surveyed in 2006 were sure they would be able to afford the lifestyle they desired.

Tim Gunning, General Manager Commonwealth Financial Planning, said, "This generation is continuing to take an optimistic outlook toward retirement despite the current economic conditions. With expectations and aspirations high, many have reviewed their financial position and taken a more active role in their retirement planning.

"Interestingly, as many as 38 per cent of respondents saw retirement as an opportunity to pursue a new career or even learn new skills. This trend suggests that many people see retirement as a series of transitions where some form of work or community service can continue into the retirement years," Mr Gunning said.

The 2007 changes to superannuation legislation have also led many Australians to reconsider their retirement strategies with one in three (33 per cent) revising or starting a new investment plan as a direct result of last year’s reforms. More than 40 per cent of people responded that they are more hands-on in their approach to superannuation, potentially cashing in on the tax incentives offered with the reforms.

Of those people who did make a change to their savings schemes, 41 per cent found that using a financial planner made the process easier.

Almost half (49 per cent) of those surveyed intended to bolster their savings by making additional contributions to their superannuation on a regular basis and 27 per cent of respondents are looking to build their assets in shares and other investments.

Taking control of their financial situation was an important consideration for most respondents with more than half (53 per cent) planning to continue working to supplement their retirement income.

"It is interesting to note that many people view retirement very actively and see it as a series of phases. The old concept of a magical day when working life ceases and retirement begins appears to be outdated as people come to terms with their aspirations for retirement and their financial reality," Mr Gunning said.

To help Australians achieve their retirement goals the Commonwealth Bank has relaunched its Retire Ready book. Retire Ready was first published in 2004 and is part of the Bank’s commitment to financial literacy. The book includes up to date information about the superannuation reforms and provides numerous investment tips and suggestions. Retire Ready is now available nationwide at all Commonwealth Bank branches when you make an appointment with a Commonwealth financial planner.

The Commonwealth Bank is also holding over 300 financial planning seminars across Australia.

To learn more about seeing a Commonwealth financial planner or attending a seminar simply call 1800 007 929 or log onto (http://service.commbank.com.au/retirement) or visit your nearest Commonwealth Bank branch.

 

Notes to editors:
The following materials are also available:

  • Lifestyle Aspirations survey highlights;
  • Top Tips to Actively Plan Ahead for your Retirement; and
  • Case studies which support the survey findings

About the Commonwealth Bank
With a market capitalisation in excess of $AUD 54 billion, the Commonwealth Bank (Group) is Australia largest financial institution, providing the most convenient and accessible banking and financial services for all Australians.

With more branches, agencies, ATMs, EFTPOS outlets and 24/7 call centres than any Australian banking and finance competitor, and offering Australia’s leading internet banking service, the Commonwealth Bank is a diverse organisation with a long history in the Australian banking industry.

1 For the purpose of this study Baby Boomers refer to 45 – 64 year olds.

2  The Lifestyle Aspirations survey was conducted by Galaxy Research on behalf of the Commonwealth Bank in February and March 2008 by telephone among a representative sample of 371 respondents aged 45-64. The national study involved interviewing those aged 18 years and over.

The Commonwealth Bank's ‘Retirement Lifestyle’ survey highlights

The ‘Retirement Lifestyle’ survey was conducted by Galaxy Research on behalf of the Commonwealth Bank in late February / early March by telephone. A representative sample of 371 respondents aged 45-64 years were interviewed about the lifestyle they expect to live in retirement and their plans for funding their retirement lifestyle.

Current Market Conditions
Considering the current volatility in investment markets, three quarters (77%) intend to make changes from now on to save toward their retirement, the most popular ideas being:

  • 56% will seek advice from a financial planner
  • Almost half (49%) will make additional contributions to super on a regular basis. This is up from 44% in March 2006.

In spite of the recent share-market uncertainty, a higher proportion of those aged 45-64 intend to build assets in shares and other investments (27%) compared to those who will build up property assets (22%), suggesting that shares remain more popular than real estate.

However, investment in shares and property overall is down from 2006 (39% versus 56% in 2006) indicating that there is a change away from investing in shares and property for retirement, and that making additional contributions to superannuation is becoming a more popular option.

Retirement Lifestyle Expectations
In spite of the current volatility in investment markets Australians aged 45-64 years continue to expect to be better off than their parents when they retire.

  • 60% expect to have a better lifestyle in retirement than their parents (compared to 59% in March 2006).
  • 6% expect a lifestyle in retirement that is not as good as their parents (compared to 7% in 2006).

While expectations are higher, fewer believe that they will be able to afford the lifestyle they want when they retire, 63% down from 68% in 2006.

Working in Retirement
More than half (53%) plan to continue working to supplement their retirement income and 29% will use the equity built up in their home to supplement retirement income.

As many as 38% will look for a career change or learn new skills after age 65. The proportion who would like to conduct volunteer work after age 65 is 71%.

2007 Superannuation Legislation Changes
Following the superannuation legislation changes in 2007 two out of three (67%) of Australians 45-64 years have not made any revisions to their superannuation strategy. The most common change is revise an existing saving and investment plan (28%) but 5% have started a new saving and investment plan.

Among those who did make a change to their super plans, 41% found that using a financial planner made the process easier.

Overall, 80% have changed their attitude to superannuation over the last two years, with:

  • 66% more aware of the need to save
  • 62% more aware of the opportunities to save
  • 60% more interested now in what happens to their super investments
  • 43% being more actively involved and hands on with their super.

Top ten tips to actively plan ahead for your retirement

  1. Assess your current financial situation including income, outgoings and assets.
  2. Consolidate your super to maximise your investment.
  3. Determine what age you expect to retire to work out how long you have left to save.
  4. Make a choice about where you would like to live in your retirement.
  5. Decide what type of lifestyle you want in retirement to find out how much annual income you will need to achieve this.
  6. Seek investment advice from an accredited financial planner to help guide you through the many options and tailor a strategy that is right for you. Interview several to find out who will suit your needs best.
  7. When deciding on a financial planner ask questions about their charging methods, background, qualifications, area specialisation and professional indemnity insurance.
  8. Ask your planner to calculate how much you will need to save between now and retirement to ensure you can lead the lifestyle you desire.
  9. Make additional contributions to your super fund if you can afford to as there can be tax and other government benefits for voluntary contributions.
  10. Determine your risk profile to enable you to set appropriate investment goals.

 

ENDS

Media Contact:

Michael Gleeson
Executive Manager, Media Management, Commonwealth Bank
Tel: 02 9378 5965
Email: michael.gleeson@cba.com.au