Critical factor in retirees’ confidence

For many, the market volatility of 2020 has been difficult to navigate. Some people realised they had too much exposure to risk in their investment portfolio only after markets fell dramatically. Super funds have reported that many members switched to more defensive portfolios after the drop.

A survey conducted by YourLifeChoices and Challenger in the middle of the first wave of the coronavirus pandemic in April 2020 canvassed how retirees were coping with share market shocks to their finances. Retirees were more concerned about share market performance than usual. This was the highest rated concern, with 43 per cent of retirees including it in their top three financial issues.

Where are retirees getting their financial advice?
The survey also sought to gain an understanding of the value retirees place on the help they seek to manage their concerns in retirement. Most people are not fully equipped to manage the financial risks in retirement on their own, and many seek help. As can be seen in the chart below, more retirees see a financial adviser in preference to any other source of guidance. Many retirees talk to their super fund, and some also see a financial adviser.

Is professional financial advice just for the wealthy?
An interesting observation of those who use financial advisers is that while wealth has some impact, a range of people with different levels of savings use financial advisers. This indicates that advisers can help retirees across many levels of wealth.

Effects of receiving financial advice on retirement confidence
The outcome of receiving professional financial advice is often an increase in confidence in managing finances in retirement. On average, retirees who have spoken to an adviser were 14 per cent more likely to be confident or very confident in their ability to live a comfortable life in retirement. And interestingly, the improvement was more evident at lower wealth levels.

With all the additional concerns retirees currently face, and their limited ability to generate new savings after working, it is not surprising that they worry about their future finances. This is an area where retirees benefit from good financial advice. It’s not that advisers necessarily remove all the uncertainty. They can’t. But they can increase the confidence of retirees to manage their needs through the uncertainties of retirement. This was evident in two questions from the survey.

Retirees who had spoken to an adviser were more likely to be confident or very confident that they would be able to sustain their lifestyle for as long as they live. They were also much more likely to report being happy with the amount of money they had for retirement. However, the higher level of happiness was not just reported by those with more money. Some of the largest differences in the impact of advice were again noted in retirees with less than $200,000 in overall savings.

The improvement in happiness does show the power of a well-advised retirement income plan across all wealth levels. Presumably, the advisers will have been able to provide constructive ideas for these retirees to put into place, increasing their confidence in managing retirement and providing the essential peace of mind that many retirees seek.

Managing your finances in retirement can be a real challenge and financial advisers can help find the best outcome for you, given your individual circumstances. However, the largest benefit might not be through any financial advice specifically, but rather the power of a well-developed plan. If retirees have a comprehensive income plan to deal with retirement uncertainties, they are likely to be more confident with their finances and happier with their personal situation.

If you need help finding an adviser, we can assist by providing you with a list of financial advisers who are experts in retirement income

Has financial advice given you extra confidence in the lead-up to or in retirement? Do you regret not seeking financial advice?

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Written by Partner Content

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