A close look at retiree fears and expectations

Post retirement issues. coping with sequencing &a plan to manage sale in growth stocks to supplement dividends.

Hindsight shows that retirement is the great unknown and unknowable. All the best laid plans of mice and men can dissipate in an instant. Yet it is the want of humans to know well in advance what will happen. We look for certainty where it doesn't exist. We seek very early warnings so we can prepare for what is coming. Then Nature steps in without warning to erode our savings, increase our costs and/or undermine our health. Result? We get what we are unprepared for and carry the consequences. Fortunately, we often get a chance to adjust for the new knowns and attempt to make our near-term life better, but then, the future becomes a new set of unknowns and sometimes unknowables

This is so true. We even visit fortune tellers and hope for answers. We cannot know what we cannot know. Like you said..the best laid plans.... I plan to spend my retirement savings and maybe leave whatever home I happen to have at my demise to my children/grandchildren. I feel that should be sufficient. I don't agree with leaving large sums in super to future generations - that's not what it's for.

Here here...

During "retirement" or the latter stages of their life - like "pre retirement" - there are significant benefits from planning for opportunities and risks ....unknowns. Otherwise, human emotions and unexpected events can adversely impact your well being - especially those humans without plans & bonds with others.

It's certainly complicated involving not just financial well being - rather a portfolio of 5 key activities - 1.Health & Self Development- physical & mental; 2.Work - both paid & unpaid/volunteering; 3.Family & Friends - Relationships ; 4.Hobbies & Social Activities; and 5. Finances - Balance sheet & Cashflows.

But as the Retirement Income Review has shown - with a million dollar financial promise from the government and future generations involving the support from the aged pension, govt health insurance, aged care, transport concessions etc etc etc - most elderly Australians with a home too - are very well placed to plan a happy old age - especially if they are shown how to unlock the private savings in their homes to boost their incomes and financial wellbeing....and overall wellbeing.

Indeed, as many surveys of financial well being show - "retirees" feel the most comfortable of any life stage - except for those elderly renting. And amongst those pre-retirement, those owning a home or with a mortgage have much higher financial comfort than renters. Buying a home and unlocking the savings later in life is a key to a better life - both pre and post retirement. Staying healthy, staying connected with family and friends, working for income or volunteering are all important too.

The coalition want self funded retirees to draw their super down at a higher rate. The stupidity in that is there is less buffer if a life event occurs such as an accident, an ongoing injury, sickness or disease etc of one of the couple (or both). I know one retiree who had to spend several $100K on their spouse's care in this regard !!

No john, it's not stupid. Saving for retirement isn't about accumulating a pool of capital purely to live off the income it then generates. Some if not all of that capital is meant to be there to use. It was income during your working years that you don't spend then so you can spend it later. It's the same as all forms of saving. You don't save to buy your wife rubies for your 40th wedding anniversary but expect not to have to use any of the capital you put aside, do you?

Yes, there's an issue with timing as you don't know when you're going to die so you don't want to run all your capital down too quickly. But a bigger problem, at least for those with reasonable amounts of retirement savings, is that they are planning on leaving most of it to their kids. THAT'S what's stupid and inappropriate.

The answer to that dilemma is to impose a tax on the capital left at death. It is not appropriate to create another generation of rent seekers

"Part of the human race". Nah, that wouldn't be right. Tax has already been paid on the income that was saved to accumulate the capital. Besides, there IS already tax levied. If the beneficiaries retain the capital they inherit they pay tax on the income; if they sell it, there's capital gains tax.
Let's rid ourselves of this mythical notion that inheritance is tax free.

Why is leaving money to your kids "stupid and inappropriate" ? I think not doing so is. It's called "intergenerational wealth", and if you didn't have it, the Carnegies, the Mellons, the Vanderbilts etc. (not to mention Europe's aristocracies) wouldn't exist if they'd SKI'd it all away.

Sure, if your kids are absolute drop kicks, leave them nothing (but then, the former is probably your own fault), don't make them depend on an inheritance, but also, don't leave them nothing if they or your Grandkids (did you forget them ?) could benefit from a bit of a cash splash.

Chris, leaving an inheritance isn't stupid, but that isn't actually what this discussion is about. Read it carefully and the conversation is about the opposite. It's about how it isn't stupid of the government to expect you to use some of your capital to help fund your retirement, it's actually perfectly reasonable. The tax advantages that helped you to accumulate super in the first place were not given to help you create intergenerational wealth, but to help you fund your retirement. If you want to build a pool of capital to leave to your kids then please pay tax on it and grow it outside the super system.

What's stupid is that over 80% of Aussies die with 80% of their wealth that they had accrued on the 1st day of their retirement! It's a personal choice - but i hope they do not just eat baked beans and watch tv in the dark!
Over savings by elderly Australians means more for beneficiaries after death bequested with a cold hand.
Why not give before death - with a warm hand?
Why not buy heath insurance to cover the health risk?
Why not get financial advice around the longevity risk of over saving.....for aged care ....and the latter part of your life?
And if not to manage your own longevity risk, why not take take a look at your wealth, cashflows, health and your years left etc and do a simple forecast for the next year.. Most Australians will see they are underspending year by year - in fear of the unknowns when they do not need to be!

Jeff, I'm interested in your comment: "What's stupid is that over 80% of Aussies die with 80% of their wealth that they had accrued on the 1st day of their retirement!".
Could you provide where you gleaned these facts?. Thanks.

The controversy of accumulating retirement savings not for retirement alone but inheritance of kids and grand-kids bristles with asymmetries galore:
Inadequate savings expose the taxpayer to age pension and other liabilities in our welfare state, but excess savings relative to own retirement do not expose the saver to commensurate cost.
The taxpayer is required to fund the income needs of seniors with low balances, but their wealth goes to offspring who outsources parental upkeep to the taxpayer.
Tax subsidies (during accumulation & withdrawal of retirement savings) can arguably support retirement limited by life expectancy and worsened by longevity and geriatric morbidity, but financing grand-kids' education is unfundable.
Parents have responsibility for the upkeep of children but in reverse children have no obligation to finance parental needs in twilight time (e.g., in Singapore).
The horror stories in the US and Europe of governments running insolvent defined benefit pension plans that mortgage the earnings of the unborn should alert policy-makers to cut the coat according to the cloth. This has not occurred. In the event, successive governments' only hope is that the inevitable implosion happens when they are out.
Is this prudent?

We have a substantial SMSF.
I've work hard for many years to accumulate for our retirement, often making sacrifices to put money into super. And payed my share of tax along the way.
I've told my family when they are winding up my estate, they'll say "the old bastard spent it"!!
If I cash in my chips early, they'll get a token few hundred thousand, the rest will go to my favorite charity!
Russel

Goodness! So much angst, bitterness and resentment. If you have managed to accumulate a decent amount to retire with, then you will probably have developed the skills to use the "nest egg" wisely and well in your retirement. [And you will NOT be a "burden on the tax-payer" ..well done] If you haven't managed to accumulate a decent "nest egg" then you will probably also struggle in retirement ! The simple transition from employed to retired will not suddenly endow you with skills that you lacked before! It is too late to start envying the financial position of other "more prudent people" , come retirement , as though , somehow, their good fortune has caused your misfortune! You need to start early, plan in advance and make sacrifices in the present to ensure rewards in the future. "Retirement comes with a host of financial, emotional and psychological fears. A sound financial plan can help manage associated fears and expectations and most importantly, ensure the transition into retirement is as seamless as possible." That PLAN had better deliver a bucket of money or it won't be seamless ... more like "seem less"! I recommend the "RETIREMENT MADE SIMPLE" by Noel Whittaker to give you some inspiration.....but you have to provide all the perspiration yourself as it is a "self help" book.

To Robert, the Retirement Income Review says: "Most retirees die with the bulk of their wealth intact." You'll need to look through it for the exact numbers: https://treasury.gov.au/publication/p2020-100554

Instead of relying on the future taxpayer, we've tried to provide for ourselves. It's important to keep home ownership relatively high, because people will not look after a property that is not theirs (think Communist countries). We have that balance about right. But home ownership can never be available to all. Some will have to rent. The bank cannot loan money to those who cannot repay it. Because it is not bank money. It is our savings. The savings of workers at risk. Reference: GFC.

Its interesting that most pre-retirees are worried about whether they will have enough and the retirees were much more interested in their health. Makes sense.

Getting people to drawdown super quicker makes sense. I'm not sure reduced drawdown rates in GFC and covid are helpful. The 17% "death tax" on undrawn super has not been mentioned. Maybe it should be better publicised, and maybe tweaked, to encourage drawdowns.

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