Retirement paradox: It's not about the money
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Over the past hundred years or so, the finance industry has been trying to convince us of one thing: we all need super. And the more we have, the better.
It’s a dogma that is behind all of the scaremongering and guilt-tripping of the three million Australians who have accessed their super early to get through COVID.
A broader view of retirement
But it turns out the finance industry is wrong. Recent research from CoreData shows that when we take a broader perspective of retirement success, there’s more to it than money.
In the real world, according to people who are actually living in retirement, retirement success is measured by how prepared, confident and satisfied we feel.
When we measure retirement success in this way, the size of our super account is not a strong statistical driver at all. It turns out there are way more important things than your super balance for a successful retirement.
Here are five of them.
Your personal health
Your health is the keystone to a successful retirement. It’s the essential building block for all areas of your life.
Without your health you may not have the energy to engage in the causes you are passionate about with the people you care most about. Your personal relationships can suffer, as well as your self-esteem and self-image.
Whether you own your own home
Owning your own home provides security for retirees. Even if your super runs out, when you own your own home the age pension can provide a fortnightly income to meet your essential needs.
It’s why we generally recommend our clients enter retirement without a mortgage. Even if it means you need to draw out some of your super balance or downsize your home, it’s a smart thing to do.
Feeling in control of your finances
Most of us don’t retire at the timing of our choice. The most common reasons for retiring unexpectedly are: our own ill-health; needing to care for a loved one; or redundancy from work.
That’s why it’s so important we feel control over the things we can control.
When you’re a retiree you can control the important things, so your money lasts the distance. You can control how much you spend and when you spend. You can also control how you invest and when you sell your assets.
Money to live on
Continuity of income is an important driver of retirement success. It’s why if you have access to a defined benefits pension, it’s usually better to take it rather than a lump sum. A defined benefits pension provides security of a fortnightly income usually indexed to inflation. It’s payable for your entire life, no matter how long you live.
Even if you don’t have access to a defined benefits pension, there are things you can do to provide regular money to live on in retirement. Common sources of retirement income include the age pension, annuity income, payments from an account-based pension or maybe even income from paid employment.
Connectedness to your community
Retirement is a time of vulnerability for many of us and we are not meant to go through it alone.
Staying connected to the people who matter to us is more important than ever for a successful retirement. Spending time with the people we care most about, and who share our interests, is good for our mental and physical health. It has a positive impact on our identity, sense of purpose, self-worth and confidence. It can even help us live longer.
There’s more to life than money. And there’s more to a successful retirement than your super balance. As retirement specialists, we have helped thousands of retirees approach their retirement with confidence. With When Financial Solutions it’s not a matter of ‘if’ you will enjoy a satisfying retirement, but ‘when’.
Michael Bowman and James McMaster are co-founders of When Financial Solutions. This article is general and does not consider your personal circumstances. If you would like advice specific to you please give us a call.