What’s your uppermost retirement fear?
We’re often surprised by many of the responses to our Retirement Pulse surveys.
In particular, in the February survey, with respondents who have yet to retire who have such strong concerns about their money lasting as long as they do. Here’s what you said when we asked, ‘What is your biggest fear or concern as you plan for retirement?’
What Pre-retirees are concerned about:
| Will I have enough money? | 60% |
| Will I lose a sense of purpose? | 18% |
| What will I do each day? | 13% |
| Will I drive my partner crazy? | 5% |
| Will I miss my work and colleagues? | 4% |
The good news is that it seems relationship concerns are low, with just 5% thinking they may drive their partner crazy. So are worries of not being ready to leave the workplace, with only 4% registering a concern about missing work or colleagues.
Concerns about what to do each day is also relatively low at 13%, but concern over losing a sense of purpose is an issue for one in five respondents and that aspect is definitely worth addressing sooner rather than later.
The most pressing concern, however, is financial. With close to two thirds of pre-retirees (60%) clearly worried about funding their retirement over the long haul, we believe it is helpful to share some reassuring facts – as well as ways to reassess your current nest egg and put your mind at rest.
Money issues are almost always based upon emotions. Concerns about not having enough are most likely to be fuelled by, in this case, the very real fear of running out.
While this fear is both common and understandable, it is not based upon fact and therefore can be challenged and – in most cases – laid to rest.
Retirement Essentials’ Changing Gears Transitioning to Retirement workshop on Wednesday March 15 is a great start if this is something you are finding challenging.
Do Australia retirees actually run out of money?
The most common form of retirement income is the Age Pension. This is paid to nearly 70% of retirees from the time they reach qualification age and apply. Within 10-15 years, when they have reached their 80s, about 80% of retirees will be on a full or part Age Pension. Age Pension entitlement represents more than a fortnightly payment, it also means ‘social transfers’ which include concession cards, concessions on certain expenses, health support and more. For those not entitled to an Age Pension, the Commonwealth Seniors Health Card (CSHC) offers many similar concessions and discounts.
Put simply, Australia’s Age Pension is a government-guaranteed, secure lifetime income stream which provides a reliable safety net for all older Australians. And this income is indexed twice a year to keep it in touch with real price and wage increases. – Yes, the situation for renters is very difficult, but the base pension payments still offer a safety net.
What do you expect from your retirement income?
Despite the seemingly endless advertising promoting a ‘rich’ retirement, most Australians are much more realistic. As referenced in the 2020 Retirement Income Review, this means that most will enjoy a reasonable ‘replacement rate’ for their pre-retirement salary. This is defined in the review as ‘65-75% of average annual disposable income in the last 10 years of working life’.
Given life in retirement is less expensive than it is when working full time, this means that most Australians are able to enjoy retirement on a reasonable income when pension entitlements, concessions and reduced taxation are factored in.
Predicting your financial future
Ongoing improvements in technology, specifically in ‘fintech’ applications, also means that we can now more accurately predict future retirement incomes, based upon current savings and superannuation, any likelihood of Age Pension eligibility and other relevant factors. In effect this means that you can now view an accurate projection of the likelihood of your money lasting as long as you do.
Many members of Retirement Essentials have benefitted from consultations in which they have used our Retirement Forecaster to see how long their money is likely to last. They have also participated in some scenario planning, by inputting different savings, spending and super actions to see the likely outcome of these different strategies.
Our advisers enjoy working with clients using this calculator as it offers ‘real time’ solutions to the ‘what if’ questions pre and post retirees usually have. Most importantly, these consultations are able to directly address the key concern of whether savings will last the distance, and if not what other options are available. Here are some of our tools and services.
- Use our Eligibility Calculator to determine if you will qualify for an Age Pension?
- Making the most of your financial resources and Centrelink with a Maximising your entitlements consultation
- Understanding spending options during your retirement journey with a Retirement Forecasting consultation
Your retirement calculator is insufficiently accurate to make bigger decisions, the Q super calculator is very accurate, from our experience, so a consultation with your service is probably justified. The biggest decision for us is that of reducing our ‘assets’ by purchasing a lifetime pension to decrease ‘a running out of money in the future’ scenario, and the subsequent change in our part pension. Calculating the Centrelink benefit versus the lifetime pension earnings reduction is the tricky part.
Hi Leslie, thank you for your feedback on our calculator! It is a simplified calculator with a focus on determining your Centrelink entitlements so no it won’t help you determine the impact of purchasing a lifetime pension. That is a very specific scenario that given it’s complexity we recommend you seek out a personal advice session with your financial planner so you can fully understand the pros/cons and potential impacts.
I’m very worried. I’m with Q Super and my balance which is now modest is dropping around $1200 every month since around April this year, over what I withdraw to live on. I’ll have nothing left before long. Seems a very bad fund to be with.