retirement savings, superannuation, cash in bank, shares, property

Here’s what you said

What is the best way to save for retirement? This is the question we posed in the March 2023 Retirement Essentials Retirement Pulse. There was a clear preference according to our members, with the top four options being:

  • Putting money in super: 46%
  • Paying off the mortgage: 24%
  • Investing in property: 18%
  • Investing in shares: 7%

Non preferred options were building a business (3%) and leaving cash in the bank (2%).

But humans are contrary creatures and what we say and what we do can be entirely different things. And people often do multiple things e.g put money into super and pay off the mortgage.  In fact this was clear in our responses to the question what did you actually do when saving for retirement?

  • Putting money in super: 46%
  • Paying off the mortgage: 24%
  • Leaving money in the bank 19%
  • Investing in property: 18%
  • Investing in shares: 7%

There was a stark  variance between the (non) preference of leaving money in cash and the percentage of people who actually did this which was used by 19% of retiree households.  But only 2% had thought that this was the best strategy. Which led us to wonder what makes us say one thing then do another?

Is it  inertia, a lack of information or discipline? Or perhaps a lack of knowledge how to measure financial outcomes? Maybe it’s also related to our financial confidence?

A lot of the above rationale is the province of behavioural economics, and it would take a thesis to usefully discuss that.

What the discrepancy in responses to the questions does suggest, however, is the propensity to act according to our perceptions of the safety and accessibility of our savings.

And as we have noted previously, while most people many feel that cash deposits are not the way to save for retirement, some will still leave money in cash as it feels more tangible, accessible and/or safe. Maybe people knew they could do better but just weren’t sure about the specifics of what to do instead.  

There is also the issue of measurement. Should we be judging returns over the short term and/or the longer term? The answer, of course, is that this depends upon your own timelines and what you need your money to do for you within a specific timeframe.

To put it bluntly, are you in the market – be it cash, shares, property or funds – for the short or long haul? 

Why does this matter with super?

When it comes to the outright preferred method of saving for retirement, superannuation, this question is of high importance.

It is only by considering your needs and anticipated returns that you can review your fund’s performance and the settings you have chosen. Or, if you have a Self-Managed Super Fund (SMSF), the investment decisions you are making as a trustee.

It’s easy to look at the long-term performance of different asset classes and note which perform best.

But any such asset class comparison needs to be assessed in relation to your age, expected longevity, financial goals and any other relevant issues, including those of health.

This information then needs to be tied back to your actual and projected spending over the next few years.

Only then can you make the decisions on investment, saving and drawdowns that will be necessary as you make the move from work to retirement transition to full time retirement.

Is your super is working hard enough on your behalf?

If you would like to understand more about super then a tailored consultation explaining how the rules work for your situation may be of benefit.
If you are interested in seeing how your total retirement savings might last the distance, then a Retirement Forecaster consultation allows you to compare different outcomes depending upon spending levels and when an Age Pension might become available. Or you can book a consultation to better understand how the rules of super can work for you.

Book a consultation