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Sunday, 24 October 2021
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Retirees want better returns but they have limited appetite to dial up their risk exposure in order to achieve it. Financial advice and protection strategies in portfolios can enhance investment outcomes.
Retirees require a reliable income stream to replace the wages they received when they were working and should focus on the dollar income generated over time rather than the headline yield percentage.
Contrary to the popular belief supported by the 'fact base' of the Retirement Income Review, four in every five Australians aged 60 and over have no super in the period up to four years before their death.
Every week, 2,500 Australians retire, or at least, reach the age of 65, and 2021-2027 will represent the peak years of the baby boom retirement surge. Longevity of life comes with dangers and opportunities.
The amount in super available at retirement is highly individual. Early withdrawals, working longer, extra contributions and work history determine if someone can maintain a desired lifestyle with the funds available.
Super counts for only 20% of the wealth of Australians. For retirement incomes, most younger people today will still receive most of their income from the age pension when they retire in three decades’ time.
The '4% withdrawal rate' is a commonly-used safe amount to take from retirement savings and not run out of money. But this may lead to frugality when retirees could enjoy a better lifestyle.
We cannot see into the future, but here are some general guidelines on how much to save in super, and then how much you can spend to enjoy a good retirement. Start as soon as possible.
ASFA has updated its tables on how much money is needed for a 'comfortable' or 'modest' lifestyle in retirement, but there are some prices rising well ahead of inflation.
Cost is one part of investing that people saving for retirement can control, and it's surprising how the compounding impact of small cost savings build up to large amounts over a long accumulation phase.
Access to regular payments from the Pension Loan Scheme is now available to any property owner of pension age irrespective of whether they qualify for the pension. It can be a valuable extra planning tool.
Retirement planning is often based on average expected returns, average expected cost of living and average life expectancy. But all of these variables can vary adversely, and we need more on the range of outcomes.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.
With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.
It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.