A widening gap: The financial benefits of delaying retirement

The Australian Government is seeking to encourage people to work past the age of 65 in order to maximise their retirement savings.

Even though there is an important relationship between people working past the age of 65 and wealth accumulation, there is little published research on the topic.

This report seeks to measure the benefits of prolonging participation in the workforce by examining the relationship between work and wealth accumulation.

Key findings

Employment and wealth in people aged between 61 and 65 years

The main findings of our study of people aged between 61 and 65 years include:

Those who were working in 2006 had, on average, 1.6 times the wealth of those who were not working but also had more than double the debt Of those still employed in 2006, half had a household net worth over $472,200 and half below this amount People who were still working four years later in 2010 had, on average, 1.8 times the household net worth of people who were not employed between 2006 and 2010. The difference was not dependent on age, sex, education or family type (couple only, couple with children, single person, single with children) Of those employed between 2006 and 2010, half had a household net worth above $598,700 and half below this amount There was no difference in the value of total assets between those who were employed in 2006 and 2010 and those who were employed in 2006 but not in 2010.

People in poor health aged between 61 and 65 years

The study examined the difference in wealth accumulation in those with poor health (a chronic health condition).

Results collected in 2006 and in 2010 compared the total wealth, financial assets, non-financial assets and debt for people who were employed and those who were not employed.

The key findings for people in poor health aged between 61 and 65 years include:

Those who were employed in 2006 had more financial and non-financial assets than those who were not employed but they also had more debt Those who remained employed until 2010 had more than four times the typical (median) value of financial assets than those who were not employed in 2006 and 2010.

Conclusion

These findings show that people who are in their early 60s or older have better retirement savings if they remain in work. This is the case even for people with a chronic health condition.

Download the full report below.