1 in 10 Australians retire early due to injury. Here’s what that means for retirement

The reality for many Australians is that retirement doesn’t always happen as planned, with just over one in 10 Australians leaving the workforce due to injury or illness – many before they reach retirement age.¹

According to the ABS, 13% of Australian retirees leave the workforce due to sickness, injury or disability. This is in addition to those forced to reduce their hours or shift into new, less demanding roles as a result of traumatic injury.

In its The Cost of Care report, Zurich found that back problems and arthritis are the most common causes for early retirement, accounting for 40% of cases.²

But the report found many other causes too, notably prostate cancer, which is the most common type of cancer among men. One in four of those diagnosed leave the workforce early as a result.

On average, prostate cancer patients retire four to five years sooner than planned.

These abrupt departures from the workforce not only disrupt livelihoods but also eat into retirement savings. A 2023 study on the effects of early super withdrawals found that even with an aggressive investment strategy, Australians who take $5,000 or more from their super before retirement age will likely struggle to meet the minimum balance for a comfortable retirement.³

Fortunately, insurance can help to bridge this gap and help Australians who do retire early due to illness or injury preserve their retirement savings so they can live the retirement lifestyle they’ve always wanted.

Protecting yourself from ‘sequencing risk’

The timing of retirement is a pivotal decision that can significantly shape your financial future. An early exit from the workforce not only shortens your saving timeline but can also impact your super returns due to ‘sequencing risk’.

Essentially, it’s the risk that you begin withdrawing from your super just before a market downturn – which can have disastrous effects on your account balance over the longer term.

Being forced from the workforce early – even if you’re old enough to access your super – can mean having to make withdrawals from super sooner than planned and sometimes in bad market conditions.

Health insurance and life insurance, such as income protection insurance can serve as financial shock absorbers in this situation, helping to smooth over potential losses due to an unplanned early retirement.

Guarding against an early retirement

There are several other strategies you can implement to protect yourself against these challenges too, including:

1. Establish an emergency fund: Saving a portion of your income for emergencies will help cover some of those costs of caring and supplement your insurance, making it less likely you’ll need to dip into your retirement savings.
2. Seek professional financial advice: Engage a financial adviser to help you understand the best insurance and investment options for your situation.
3. Plan for healthcare costs: Consider the potential cost of care. Remember, it’s not just the price of treatment you need to plan for, but time off to recover, any travel or accommodation you may need, and carer fees.
4. Regularly review your insurance policies: Insurance isn’t a ‘set-and-forget’ strategy. Routinely check your health and income protection insurance cover is up-to-date and update your policies after every major milestone in your life to ensure you always have the right protection.

How to buy insurance from Zurich

Zurich makes it easy to protect yourself financially against injury and illness. There are two ways you can apply for insurance with Zurich:

Speak to a financial adviser to work out the type and level of cover you need and structure your cover to give you the best value for your protection.

Apply directly if you already know what kind of cover you need. With Zurich Ezicover, you can apply directly for cover – you can even get an online quote.

 

¹ Australian Bureau of Statistics, ‘Retirement and Retirement Intentions, Australia’, 2022-23 financial year, 22 May 2024, accessed 4 December 2024
² Zurich, The Cost of Care Volume 2, p. 99
³ U Kapoor, R Tajaddini, A Moradi-Motlagh, “The impact of early withdrawal on superannuation balance at retirement: Evidence from Australia”, International Review of Finance, 14 April 2024, accessed 19 December 2024