Retirement Readiness

Complexity of Retirement Risks Is a Challenge Common to Future Retirees in U.S., U.K., Australia

Many start to plan but cannot follow through

WASHINGTON—A new international survey from the American Academy of Actuaries, the Institute and Faculty of Actuaries (U.K.), and the Actuaries Institute of Australia shows that many people in the United States, the United Kingdom, and Australia struggle with preparing for retirement for similar reasons.

“Many people start planning but can’t follow through because they aren’t equipped to address complex questions like how much they need to save for retirement, how they will cover the risk of an especially long life, or how they will handle unexpected costs associated with chronic health conditions as they age,” said Academy Senior Pension Fellow Ted Goldman. “A concerted effort by policymakers to support education initiatives could help savers sort out the tough questions they face as they prepare for their retirement future.”

A major factor behind the challenges, according to Retirement Readiness: A Comparative Analysis of Australia, the United Kingdom, and the United States, is the increasing demand on Americans, British, and Australians to individually manage the risks of their future retirement. While the pension and retirement systems of all three countries provide some safeguards against risks, the trend away from defined benefit pension systems continues to shift greater responsibility to individuals for taking the steps to achieve financial security in retirement.

Little more than half of all respondents (working-age people ages 18–64) believe they are preparing for retirement’s risks; nearly half are not. Among the risks, longevity risk is the least understood. “Only about one-third of the respondents know how long their assets will last in retirement, and about half have planned for the possibility of a longer-than-expected life,” the survey concludes.

Excerpts from the Retirement Readiness survey

Key observations: Three national samples categorized by age

Planning to Retire?
Percentages planning to retire decline with age, with 75% of the youngest
cohort planning to retire, 70% of the middle age cohort so planning, and 64% of the oldest
cohort. The same pattern applies in each country, with the largest difference between young
and old in the United Kingdom (17 percentage points) and the smallest difference in the United
States (4 percentage points).

Planning to Retire Fully?
Percentages planning to retire fully (i.e., quit working completely)
increase with age, but only slightly, from 25% for the youngest, to 28% for the middle, and to 30%
for the oldest cohort. In the United States, the percentage of middle-aged respondents expecting
to retire fully is 5 percentage points less than that of the youngest cohort, while in Australia
and the United Kingdom the percentages of the middle cohort are 8 percentage points higher
than the youngest. For all three countries, percentages of those planning to retire fully are 2-3
percentage points less for middle-aged than for the oldest age cohorts.

Understanding and managing complex retirement risks presents a societal challenge, not just a personal one

Planning to Retire in Their 70s?
Twenty seven percent of all respondents aged 18-34 expect to retire in their 70s,
while 17% of respondents aged 35-54 expect to do so, and 31% of those over age 55 expect to
retire in their 70s. This pattern is repeated in all three countries.

Expecting a Flourishing or Comfortable Lifestyle?
Older respondents are slightly more likely to
expect a comfortable retirement, with 41% of younger and middle-aged respondents and 44% of
older respondents affirming that positive expectation. In both Australia and the United Kingdom,
the middle age cohorts are at higher percentages than younger cohorts, and older cohorts are
higher still. In the United States, the middle-aged cohort is slightly higher, but the oldest cohort
is somewhat lower.

Sources of Expected Income?
Government programs yield substantially higher percentages
of individuals’ expected income sources as we move from the youngest (53%), to middle-aged
(65%), to the oldest cohorts (81%). Expectations of employer benefits increase slightly (with 5
percentage points more of the oldest cohort compared to the youngest), while expectations of
relying on personal savings decrease slightly (with 7 percentage points fewer of the oldest cohort
compared to the youngest). Reliance on home equity increases by 10 percentage points as we
move from the youngest to the middle-aged cohorts and then remains the same for the oldest.
For the United States, there is an increase in the percentage of respondents expecting to rely on
home equity as we move from the middle-aged to the oldest cohort, while in Australia and the
United Kingdom there is a decrease.

A Societal Challenge

“Understanding and managing complex retirement risks presents a societal challenge, not just a personal one,” said Goldman. “As a society, we need to be open to new retirement policy approaches and public education initiatives to help people evaluate and address the risks and achieve financial security in retirement.”

The survey recommends targeted financial education, greater use of default features in private retirement plans, and ensuring that public pension and social insurance systems are sustainable and capable of providing adequately for those who depend on them most.

Read more in-depth analysis of pension and retirement issues under the public policy tab at




About the American Academy of Actuaries
The American Academy of Actuaries is a 19,000-member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.