Tag Archives: Retirement

Will you outlive your Retirement Savings?

By Robert Wright /July 03,2015/

When we think about what our lives may be like once we finally leave the workforce and retire, we tend to imagine a comfortable lifestyle with time spent on hobbies, travel and other leisure activities. However the reality for many Australians is quite different.

The fact of the matter is that many Australians are ill-prepared when they reach retirement age and have insufficient retirement savings to fund the lifestyle they imagined. It’s an issue confronting many more Australians than you might think, and with Australia’s ageing population and people living longer than ever before it’s a problem which is likely to exacerbate.

New research by MLC shows that the average retirement savings gap is as much as $150,000 with people underestimating the length of time they will spend in retirement by up to seven years. In addition, only 10 per cent of people have a plan to address longevity risk, which is the risk that you might outlive your retirement savings.

The oldest Australian right now is 122 years of age. The issue is not so much that our lifespans are increasing but that the number of people living up to that maximum age is increasing too. That’s the issue for longevity – people are underestimating how long they will live for.

If you are a 65 year old couple, there’s a 50 per cent chance that at least one of you will be alive at 95, so you should have a thirty year plan horizon. Another consideration is that while many people intend to work until a certain age, in reality they often end up retiring earlier than planned. This may be because they have been retrenched, fallen ill, or need to care for a family member or other dependant. In these circumstances they miss out on the income they would have received had they continued working.

The figures are fairly stark. According to MLC’s Retirement Income Report (2014), 44 per cent of those already in retirement predicted that they would outlive their retirement savings, while 51 per cent of those still working (accumulators and pre-retirees) predicted that they too would outlive their retirement savings.

These figures also mirror the Federal Government’s findings in the 2015 Intergenerational Report. Key findings in the Government’s report confirm that Australians are living longer and healthier lives and have one of the longest life expectancies in the world. However longevity and a rapidly ageing population will continue to add pressure on Government funding of social security entitlements including the Age Pension.

According to the report, by 2055 there will only be 2.7 working Australians for every person over 65, compared with 4.5 today and 7.3 in 1974-75. By 2040, there will be 10.8 million Australians 55 years of age and over.

The findings emphasise the importance of seeking advice from a qualified professional when it comes to planning for your retirement. Financial advisers possess the skills and expertise to help Australians build their retirement savings, implement transition to retirement strategies and manage longevity risks.

According to Mark Rantall, Chief Executive of the Financial Planning Association of Australia, Australians who receive financial advice are more likely to rely on a part-pension rather than a full pension, they have a greater standard of living and are able to better any longevity risk.

Contact your Financial Adviser today for further information.

 

Source: Capstone and MLC.

 

When You Retire But Your Partner Doesn’t

By admin /April 27,2015/

Many couples dream of sharing a life of leisure together. But what happens when things get out of sync?

When we think of retirement, we often imagine a happy couple strolling hand in hand on the beach. But even if you and your partner are similar ages, chances are you won’t retire at the same time. And according to Clinical Psychologist Anna-Marie Taylor from the Australian Psychological Society (APS), that can be a source of conflict and frustration.

“The retired partner may become irritable, withdrawn, less supportive and unavailable. And one partner may be unconsciously jealous of the other, which can create conflict,” she says.

If the retiring partner doesn’t have a clear plan for life after work, there’s a danger they may get depressed.

“This can especially be true for men, as their sense of identity is often defined by work.”

But Taylor says there can also be real advantages in having one partner at home while the other continues to provide financial stability. The secret is open and effective communication, together with a willingness to cultivate new interests and an ability to structure your own time outside work.

We talked to two couples who have overcome the challenges to find a new sense of freedom and fulfilment in the next stage of their shared lives.

A new sense of freedom

Elisabeth Holmes retired from her part-time government job last year, while her husband Lindsay continues to run his home-based software consultancy business.

“My mother was in aged care and my daughter was interstate and about to have her first child. I wanted to be more available to them,” Elisabeth says.

While the transition was strange at first, Elisabeth is now finding her new role very rewarding. Having a clear sense of purpose has made a big difference.

“Because I’m not working I can visit my daughter and her new baby on my own, or Lindsay can come too as he can work remotely from a laptop,” she says.

Her retirement has helped make Lindsay’s life less stressful, as the demands of running his own business often mean he has to put in more than five days a week.

“Elisabeth was able to pick up tasks we’ve been sharing, giving me a bit more freedom,” Lindsay says. “And it’s also meant we can spend more quality time together, which has been good for us.”

Importantly, the couple spoke with their financial adviser before retiring to ensure that their super savings were on track to give them the retirement lifestyle they wanted. Elisabeth says that knowing her finances were in good hands allowed her to retire with confidence.

When retirement comes suddenly

Retirement came as a surprise for Sue Mackenzie, when she was unexpectedly diagnosed with breast cancer. Faced with a long period of treatment and recovery, she decided to leave her job as an occupational therapist while her husband, Greg, continued to work.

Initially, Sue and Greg were concerned about the financial impact her retirement would have.

“While Sue was only working part-time at the end, we were still used to living with two incomes,” Greg says. But careful planning helped them adjust, while using Greg’s income to boost their savings.

Happily, Sue is now cancer-free. With her health restored, she has decided to focus on renovating and running their home.

“Sue enjoys running the household, and she’s been able to devote time to creating a really great home,” Greg says. “It takes a lot of time and effort, but gives her a lot of enjoyment and a real sense of self-identity.”

Keeping your finances on track

Making the transition from two incomes to one can be challenging, but it can also bring new opportunities.

For example, depending on your situation, you may be able to draw on tax-free pension payments for your day-to-day expenses, while putting more of the working partner’s salary into super through salary sacrifice. That could help lower your overall tax burden while boosting your super at the same time.

A financial adviser can help you explore the options both before and after retirement, then identify the best choices for your situation.

Source: Colonial.