How to retire with greater confidence

4 Jul 2024

For some Australians, retirement is everything they were promised. Indeed, those retiring today may be healthier than any previous generation. Social researcher Bernard Salt calls ages 65-85, ‘The Great Contentment’.

However, retirees and pre-retirees often face a wall of worries. In the earlier decades of our working lives, most Australians are focused on career, family and buying a home. Put simply, superannuation isn’t a priority. Until it is.

In focus group research conducted for AMP, many in their 50s and 60s talk about a sudden mad scramble to ‘catch up’ and meet an ill-defined retirement goal.
So, let’s look at some of the challenges you might be facing.

Conquering the Fear of Running Out (FORO)
Many Australians worry about running out of money in retirement. After a lifetime of working and receiving a constant income, the prospect of funding an enjoyable retirement from a single, soon-to-dwindle pile of money looms as a mathematical challenge and emotional rollercoaster.

This fear of running out is heightened when the growing cost of living eats away at your lifetime savings. International retirement income specialist Don Ezra points to two sources of worry when providing for life after full-time work: “One is that you don’t know how long you’ll live. The other is that you don’t know how large a return your financial capital will earn.”

Complexity and variables
In Australia, we may have the most complex retirement system in the world and this complexity seemingly increases with every election cycle. In addition to regulatory, longevity and return risk, retirees operate within complex tax and social security systems.

Everyone has a unique set of variables that impact their situation. Some retirees are ushered into retirement by illness or injury. Others have retirement strategies complicated by divorce and re-partnering. Or perhaps a couple retires at different ages and access the age pension at separate times.

And, of course, the duration of retirement is itself unknown.

Trouble at home
Reverse mortgage schemes like the Government’s Home Equity Access Scheme are gaining popularity and provide a significant increase in age pension income. Yet many retirees will remain ‘asset rich and cash poor’ until they can monetise the capital in their home without the risk, costs, and potential bequest-reduction inherent in a debt-driven home-equity solution.

Price pressures
The re-emergence of inflation is exacerbating these challenges. In AMP’s 2022 Financial Wellness report nearly half of those aged 50–59 were ‘extremely concerned’ about the rising cost of living. While you are working, your wages, super contributions, and investment income typically rise with inflation. In retirement, that protection is lost, and because inflation compounds over time, it can represent a real threat to your lifestyle.

Finding a solution
Are you retiring soon, or are you already retired? We can guide you through managing these challenges, helping you build a large enough nest egg to enable you to balance your retirement lifestyle with any sense of obligation to your family. After all, retirement should mean giving up work, not giving up your lifestyle.

This goal requires education, determination, clear goals, strategic advice, and clear communication. We’re here to help.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.