Retirement age peaks amid ‘fundamental’ labour force shift

For the second consecutive year, Australians have been retiring at their oldest age since the early 1970s, new data from KPMG has shown.

In both 2022 and 2023, the expected retirement age for men was 66.2 years and 64.8 years for women – the highest it has been since 1972 and 1971, respectively.

Two decades earlier, the retirement age for men was 63.3 years and for women, 61.6 years.

According to KPMG, this trend has been driven largely by improved job flexibility in “knowledge-intensive” roles and tighter labour market conditions, meaning highly educated Australians are staying in the workforce longer.

“The adoption of working from home has made many older Australians in professional jobs realise that they could ‘semi-retire’ and continue to dabble in the workforce from home or even from a coastal location,” KPMG economist Terry Rawnsley said.

The expected age of retirement was boosted by older workers remaining in the labour force during COVID-19 to fill the “vital gaps” that emerged in the Australian labour market during that period.

Namely, between 2019 and 2021, the Australian labour force grew by 185,000 people, with those aged 55 and over representing almost 70 per cent (127,000) of that increase.

However, with the return of international migration and the growth in the under-55 labour force, the share of over-55s fell to 21.3 per cent in 2023.

But even in a tight labour market such as this, Rawnsley believes Australia might have reached a plateau in the expected age of retirement, emphasising that “we cannot expect older workers to continue working longer”.

“This is because we simply can’t find enough older workers to sustain the growth that occurred during the COVID-19 era,” he said.

Recent research by the Treasury revealed the Australian population will continue to age over the next 40 years. The number of Australians aged 65 and over will more than double and the number aged 85 and over will more than triple.

The number of centenarians is expected to increase sixfold.

As the population ages, the Treasury said, the overall participation rate is projected to decline gradually from 66.6 per cent to 63.8 per cent in 2062–63.