Running out of money: Australians fret about retirement

"Complexities like the integration of the superannuation system with the aged pension and aged care services spur a lack of confidence in the system," Shead says.  

"Making that mental transition from a capital amount to an income that I'm going to be living on in retirement, is very difficult to do." 

Another source of anxiety for investors, Shead said, was the constant talk around the Age Pension, and perceptions that the eligibility rules would tighten.  

"The constant messages about strains on government budgets, about the cost of various social security services, and on the need for people to be self-sufficient - that's a double-edged sword," Shead says.  

"On the one hand, it encourages people to take ownership for the adequacy of their income in retirement and it has done that, but it also sends a message that you can't count on government support in any way shape or form, and this isn't true. 

"Many Australians when they retire will be entitled to, if not a full pension, then a part pension. This tension will continue to play an important part in how Australians mentally process feel confident about retirement." 

However, there are some positives. People who are five years from retirement have a better knowledge of the system and a more a positive about the future.  

That said, more than a quarter still believe they would struggle to get close to what they need in retirement.  

To cope with the pain, working Australians expect to spend less on clothes, entertainment and technology when they retire. Many also want to use their home equity to fund retirement, with 46 per cent of working Australians expecting to downsize to a smaller home. 

Close to half of the workforce is also gearing up to work part-time in retirement, while many also plan to retire later. This mirrors ABS data which shows the proportion of people in the labour force over 65 is steadily increasing: it rose from 9.4 per cent in 2006 to 14 per cent in 2016.

However, few current retirees, the survey said, nominated part-time work as a significant source of income in retirement. Nor did the strategy of downsizing the family home using equity release products rank highly.  

"There's a sense in the workforce that people will work part-time through retirement, and in one sense that's true," Shead says.  

"If we're all living longer, people are going to expect to work longer and part-time work will play a part of that. But when we spoke to retirees, particularly recent retirees, many of them weren't working part-time. There are still some disconnects about what people think retirement is going to look like, and what it actually is." 

There were also lessons to be learned from current retirees, Shead said – chief among them: working Australians should start saving earlier for their retirement and engage with pension planning earlier.