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Why you'll probably retire later than you think

Your retirement age is likely to be determined by your education level.

Retired couple walking on beach
Australian workers holding a postgraduate degree tend to retire much later than the rest of the labour force. (Source: Getty) (Halfpoint Images via Getty Images)

Educated Australians are choosing to work longer, with workers retiring at the oldest age since the early 1970s, according to new research.

Analysis by KPMG urban economist Terry Rawnsley reveals that in 2022, the expected retirement age for men reached a record high of 66.2 - the oldest since 1972. Women are also retiring at increasingly older ages, with the expected retirement age rising from 61.7 to 64.8 over the last two decades.

The trend towards later retirement is particularly pronounced among highly educated Australians in "knowledge intensive" roles that allow for greater job flexibility. Their willingness to work longer could potentially transform Australia's economy, as the country becomes increasingly educated and experienced workers hold onto their jobs for longer.

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Pandemic triggered 'Great Unretirement'

The Covid-19 pandemic led to a phenomenon dubbed the "Great Unretirement", which has significantly impacted the Australian workforce by causing more people to delay their retirement plans.

The KPMG report reveals that in the past three years, approximately 537,000 people joined the workforce, with 179,000 over the age of 55 years. As a result of the pandemic, women have been increasingly drawn into full-time employment, causing their retirement age from full-time work to increase by more than a year. Similarly, the retirement age for men has been on the rise, primarily due to increases in part-time employment.

Retired couple looking at laptop computer
Workers who have completed Year 10 and above were expected to retire at just over 65 years. (Source: Getty) (Oliver Rossi via Getty Images)

This trend towards later retirement is facilitated by flexible work arrangements, allowing professionals to "semi-retire" and work remotely from home or other locations. Rawnsley notes that employers are accommodating this shift in response to a tight labour market caused by reduced international migration.

New workforce trends emerging

Findings suggest that over the last 30 years, there has also been a shift towards service-based jobs and away from more physically demanding jobs. These trends are reflected in retirement age expectations, with postgraduate degree holders expected to retire after 67 years, while on the other hand, workers with a bachelor's degree - which typically includes less-flexible professions, such as teaching and nursingm - are expected to retire around 66 years.

According to Rawnsley, the trend of retiring later in life has been particularly evident in Sydney, where some of the largest increases in the retirement age have been observed since the beginning of the pandemic. He believes that this trend is unlikely to reverse anytime soon, given current tight labour market conditions. Additionally, he states that as the economy becomes increasingly educated, this is likely to push the retirement age of the entire workforce higher.

Superannuation eligibility delays retirement plans

According to ABS data, reaching the eligible age for superannuation/pension was the reason behind retirement for approximately 40 per cent of recently retired Australians, while around 60 per cent retired for other reasons. The study concludes that cost of living is not typically a significant factor when it comes to deciding whether or not to retire, with the recent increase in the age of retirement pre-dating the spike in inflation during 2022.

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