The fast-approaching ‘silver tsunami’ set to hit the Australian economy

Australia is fast approaching a ‘silver tsunami’ that will bring with it significant socio-economic challenges for the country says  the Retirement Living Council (RLC), a division of the Property Council Australia. RLC Executive Director Daniel Gannon said the council is concerned about housing affordability for older Australians and the provision of enough housing options, such as retirement villages, to allow for an affordable and comfortable lifestyle after they stop working.

There are 4.2 million retirees in Australia today, and another 710,000 people intend to retire over the next five years, according to new data from the Australian Bureau of Statistics (ABS). Over the next two years, 226,000 people intend to retire, which is almost 100,000 more than the number of people who retired between FY21 and FY23.

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The average age at retirement among Australia’s current cohort of retirees was 56.9 years, according to the data. However, the average age that most people intend to retire is 65.4 years, which is about 18 months before they become eligible for the age pension at 67 years of age.

On average, women retire sooner than men, but they are retiring later than in previous years. In FY23, the average age at retirement among female retirees was 54.7 years, up from 54 years in FY21. Men are also retiring slightly later with their average age at retirement now 59.4 years, compared to 59.3 years in FY21. Over these two years, Queensland saw the greatest increase in its retiree population, up 32,000 to 860,000. New South Wales had the largest retiree population at 1.3 million.

The ABS said the main factor influencing someone’s decision about when to retire was financial security. In FY23, the most common reason for deciding to retire cited by 31% of those surveyed was reaching the retirement age (i.e., pension age) or becoming eligible to access their superannuation. Most Australians can’t access their superannuation until they reach their preservation age. This age varies depending on the age of birth but ranges from 55 years for those born before 1 July 1960 to 60 years for those born after 30 June 1964.

The second most common reason behind retiring was sickness, injury or disability (13 percent). The next most common was being retrenched, dismissed or not being able to find work (5 percent). In these cases, financial security may not be assured and retirement becomes more of a forced decision. Currently, the age pension is still the main source of income for most retirees, with superannuation the second most common main source of income.

Given financial security is a key concern among those nearing or at retirement age, Mr Gannon said governments needed to ensure there would be enough suitable and affordable housing options for retirees as their numbers grow. “Unfortunately, a rapidly growing number of Australians are retiring with mortgage debt while the aged pension remains the main source of income for most retirees. Units in retirement communities are priced on average 48 percent lower than median house prices in the same postcode, meaning these communities can help address retirement income challenges.”

Mr Gannon said the recent Federal Budget contained no housing plan for older Australians amid today’s housing supply and affordability crisis. “While [the increase in] Commonwealth rent assistance is welcome news for some Australians, the existing eligibility thresholds exclude the majority of people living in affordably priced retirement units,” he said.