The missing piece of the retirement puzzle
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Over the last couple of weeks, the government has released the Retirement Income Review report. The Review’s observations will shape policy around super, tax and social security for years to come.
One observation has attracted more attention than all the others. Not enough people are spending their super during retirement.
Inefficient use of retirement assets
It’s a fact that most retirees don’t really spend down their super during retirement. It’s a problem because super is such an important pillar of Australia’s retirement savings policy. And a major assumption of the policy is that people will spend their super during retirement.
Since the release of the report, the financial industry gurus have been debating what should be done about this. Should we require people to spend their super? Should we make it compulsory to buy an annuity? Should we change the tax system so that super is taxed higher in the hands of beneficiaries?
Chaos not conspiracy
But we think they’re missing the bigger picture. Retirees aren’t intentionally saving their super for future generations. Most people aren’t motivated to leave a great, big bequest to their beneficiaries after they’re dead. Sure, it might be the outcome of their behaviour, but it’s certainly not their intention.
Retirees are just trying to balance today’s expenditure with being responsible for the future. And they don’t know how much they should spend.
Retirement is long, and CoreData research shows that retirees worry about running out of money more than anything else. Even more than their health.
Retirees want to have enough money left in their old age to manage their health challenges and meet aged care expenses. They don’t want to be a burden on their families.
Advice is the missing piece
In the end, retirees just want guidance from a professional they can trust. Guidance on how much they can responsibly afford to spend. Most of us are not big spenders. We don’t need a red sportscar, or to cruise on the QE2. But we’d love to renovate the kitchen, regularly host our friends and go on trips from time to time.
And that’s the value of high-quality financial advice. It helps you understand how you’re tracking in retirement and gives you the information you need to make the right trade-off decisions.
At When Financial Solutions we give you the confidence to spend today, knowing you will be secure in the future. We project the outcomes of your decisions and help you prioritise what’s most important. Our clients are able to spend more and do more in their retirements.
Because when you choose When Financial Solutions, it’s not a matter of ‘if’ you will have a full, purposeful and satisfying retirement. It’s just a matter of ‘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.