Retirees accused of being too conservative with their spending

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Retirees are accused of being too conservative with their spending, leading to calls for changes to superannuation drawdown rules.

According to Nick Callil, head of retirement solutions at insurance firm Willis Towers Watson, the Age Pension and related benefits need to be more closely integrated with compulsory and voluntary superannuation to deliver a better retirement income system.

“Often, there is an assumption (generally unspoken) that assets individuals have accumulated for retirement are not to be drawn down during the retirement years,” he said in his Superannuation is for Spending report.

The report suggests that superannuation funds are hindered from offering more tailored drawdown guidance due to concerns about regulatory constraints on providing advice and limited information available about retiree members.

“Living off the interest income from term deposits or the dividend income emanating from a share portfolio sounds attractive, but for most retirees (who have little in the way of income-producing assets outside superannuation) this sort of strategy is unlikely to produce an income they might regard as adequate,” Mr Callil said.

One of Mr Callil’s suggestions is for superannuation funds to provide estimates of projected retirement income during the accumulation phase (particularly as members approach retirement) to promote the primary aim of superannuation as spending in retirement.

Some superannuation funds do provide these estimates, but Mr Callil believes they should be mandatory.

He also suggests that super funds should review their default drawdown offerings to ensure they are not too conservative and do not promote inappropriately low spending by retirees. They should also improve and promote their longevity protection products to ensure retirees are sufficiently comfortable that they will not run out of money.

Do you only spend the money earned by your superannuation fund or do you draw down from the balance? How do you manage your retirement income? Do you think you are too conservative with your spending?

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Written by Ben


Total Comments: 45
  1. 0

    Our super fund has always projected our future position but as it is done on past performance it doesn’t really mean all that much. Our 10 year average which is the basis for the projection is unrealistic when today’s rates are considered. What we find is more helpful is that we achieve more than 5% after fees each year and our Industry super fund has achieved this. Whilst this means that we should never run out of super, the buying power in the future will be a lot different.

    To answer the questions, we accept the minimum drawdown of 5% and have no need to draw more than that from our super fund. We let our super fund look after our funds and are quite happy with what they have achieved for us. Asking if someone is too conservative with their spending is akin to asking how long is a piece of string. We were never in high paying employment for most of our working lives so we have always tried to live within our means and if that translates as being conservative then so be it.

  2. 0

    We do not have a super fund to draw from. We do have some capital and I sincerely hope it outlasts us, I am doubtful it will as with the current low interest rates we have to dip into capital to pay bills.

    • 0

      AutumnOz (nice name!), I am in the same position. No super, small amount of savings, have Age pension but worried about how long my money will last. I have chronic health issues, and the prospect of unexpected health costs is worrying. The low interest rates is disastrous. How dare they tell us we should be spending more!

  3. 0

    I have no problem with retirees with substantial Super balances being conservative with investment choices and the rate at which they draw down on their Super as long as they don’t continue to moan about how they are living in poverty when they don’t need to. Too many think it is unfair to expect them to spend some of their capital to achieve a decent retirement income. The tax system before retirement and after retirement is very generous – low tax rates on Super contributions and investment returns during the accumulation phase and no tax in retirement (spending phase). Many retirees who have this mindset (generally the ones who moan) think that they are entitled to even more generosity through greater Age Pension entitlements (a greater tax burden on the ever reducing number of tax payers). The irony is that if they would only spend some of their capital they would be entitled over time for a larger pension entitlement.

  4. 0

    Having worked hard all our lives to accumulate what we have, yes we are conservative in our spending, but not mean. We have a budget and stick to it. Very happy with the positive return from our Industry fund but I would only make a capital drawdown for large essential purchases or unforeseen events because you never know what the future will bring. I do however, know retirees who live in enforced poverty because they want to leave everything to their kids. Makes no sense to me, but it is their money and they can do what they want.

    • 0

      Sundays, I agree with you about the utter stupidity of people not spending their own money so as to leave it to kids. I have a close friend in a similar situation, owns own home, had good super, but does nothing, goes nowhere, simply saying she wants to put it aside for her only son. But he is quite well off, aged 35, and could survive very well without any help from mum. Really annoys me.

    • 0

      as you say Sundays, it’s up to retirees with assets behind them whether to spend or to conserve their wealth to pass onto the kids. Frankly I could not care less about their choices but I do wish they would stop whining about being hard done by and forced to live an impoverished lifestyle due to low investment returns. Never heard peep when interest rates were higher.

    • 0

      A few of us have been hit rather hard 10 years ago during the GFC and have not forgotten the experience and so we are a bit more conservative than we otherwise would be.

    • 0

      That is very relevant, Cowboy Jim. We don’t know what the future holds & many people have a “once bitten, twice shy” policy because of what happened to their retirement plans after the GFC.

      I know people who swore they’d never go to Centrelink asking for help in their retirement, but after the GFC everything changed for them.

      I’m sick & tired of our Federal Govt telling everyone to spend their own money, but meanwhile the Govt is DOING NOTHING to stimulate the economy. All so they can brag about a Surplus, only possible because they haven’t spent the money set aside for services like the NDIS ($3.4 billion). Now we have disabled children being carted about in wheelbarrows because they’ve outgrown their old wheelchair & the Govt is stalling the flow of processing the claim for essential equipment like wheelchairs. Or, they get a new frame for the wheelchair but it doesn’t have wheels. It’s so cruel.

      The Govt is a f…ing disgrace if they think this will be a vote-winner in the next election, but there are always plenty of idiots who will fall for it.

  5. 0

    You need to be conservative with your spending as the market fluctuates and no one knows when a market crash will/can occur and there is no guarantee how much money will be left. For retirees it is not possible to replace monies lost this way. For younger people who are still working it not such a problem.

    • 0

      I agree and everything is going up. I just received an email from the toll company to say the government will charge 0.45% more on payments by credit card . They want direct debit.
      No way will I allow that. Looks like I’ll be taking way longer going around the suburbs to avoid tolls. It’ll cost more in fuel but so be it.

  6. 0

    So an insurance firm is setting government policies.

    • 0

      Where the hell do you get that idea from reading this article, it’s a report by the company for all to read, not for the government to set polices.

    • 0

      “One of Mr Callil’s suggestions is for superannuation funds to provide estimates of projected retirement income during the accumulation phase (particularly as members approach retirement) to promote the primary aim of superannuation as spending in retirement.

      Some superannuation funds do provide these estimates, but Mr Callil believes they should be mandatory.”

      Where it says “mandatory” who is going to implement that ?
      Mr Callil or the I’ve got no policy ideas LNP?
      Does “mandatory” mean self regulation? The banks know how that works.
      What next a Cashless Pension Card to ensure pensioners spend all their “welfare” ?
      Who is going to implement that Mr Callil or the I’ve got no policy ideas LNP?

      And yes I was provided a spending estimate by my superannuation fund which drew down my assets to zero over my projected life needs. But then the LNP a Greens put a hole in that projection by stealing my “welfare” with the 2017 changes to the Pensioner Assets Test

      One doesn’t plan their retirement income the day before they retire and I understand that polices need to be fine tuned but decisions need to made, not based on lies, like the budget emergency, lifters and leaners. Negative gearing for housing investors has created unaffordable housing. The LNP have no idea.

      What’s the LNPs policy on climate change? No idea. Just kick that can down the road too.

    • 0

      Yes the neighbour just had a water pipe break and it’s going to cost a few thousand to fix. How is the welfare card going to work on saving for home repairs and maintenance.

      Everything costs more and they wonder why we don’t spend everything each pay like foolish people do.

  7. 0

    Retirees being too conservative with their spending. This maybe so with people who have Superannuation but those of us on the ‘Old Age Pension’ WE HAVE NO MORE MONEY TO SPEND once we pay for everyday needs and essentials and even then the PENSION IS NOT ENOUGH AND WE GO WITHOUT.

    • 0

      The article clearly does not refer to the skint retirees struggling to make do on the aged pension, and even less so to the retiree trying to get by on Newstart.

  8. 0

    Perhaps most retirees do not trust the L.N.P not to change the rules yet again.I would rather trust a used car salesmen then our present P.M.

    • 0

      Get over yourself floss. Nothing to do with the colour of the Government. Superannuants were just as conservative in their draw downs under the ALP for what I suspect is 2 main reasons:

      1. leaving as much as possible for the kids and grandkids – this makes no sense to me at all.

      2. Not knowing how long they will live and wanting to ensure the money doesn’t run out before they do.

      Neither of these ‘reasons’ are influenced by the colour of the incumbant Government.

    • 0

      Maybe not knowing how much future needs will cost. saving for home care because the government does not support savers at all. Saving for hefty maintenance bills as homes age,

      Saving for travel, increased food and fuel and electricity and water costs.

      Lots of things can cost quite a bit as the years go by and leaving it for kids isn’t really a thing.

      Of course we could go spend it all propping up retail and hospitality and then whinge and wail when the water heater blows up or the air conditioner need replacing or the verandah needs a rebuild that will cost about $20 000.

      Honestly I doubt these young ones thinking it’s being saved for the kids have any life experiences at all. They must lurch from crisis to crisis with no savings as a back up but able to borrow.

    • 0

      it’s one thing to budget and have some savings put aside for the unexpected and quite another to sit on a nest egg to leave to the next generations. I talk to many retirees with plenty of assets earning low investment returns and complaining about how tough life it is living on less than the aged pension. It never crosses their mind to spend some of the savings to improve their lifestyle.

    • 0

      KSS, when Labor came into Govt in 2007, they were wise to flush money into the economy when the GFC hit, because it averted a Recession.

      But now, with the world’s economies very unstable & record-low interest rates, negative wage growth for many & low low inflation, we have this Liberal Govt squeezing everyone but themselves, so they can implement austerity measures & then brag about having a Surplus.

      The Libs are doing nothing to stimulate the economy except to make very rich people even richer, at the cost of everyone else. They call it “trickle-down economics” & they’re proud of it.

      The Liberal Govt can’t now blame people for being conservative with their savings because the Libs have helped to create the current fear for the future scenario. I think the Libs know this but they can’t back down because they’ll lose too much face.

  9. 0

    I found the questions are based on the assumption that everyone is equal in terms of financial needs, stage of health, degrees of age-care, family-support, and mental health. Unfortunately, retirees are not all equal. Superannuation should be designed for each individual needs. A broad brush in reviewing superannuation, individual savings and earnings, and franking credits will not give a good picture of what is the comfortable income source for retirees. It is a witch hunt!

  10. 0

    It’s my business how I spend the money I’ve accumulated over many years of hard work. Investment market returns are not guaranteed and I don’t know how long I will need to support myself. In the meantime the rules keep changing as evidenced by this proposal. Am I going to be told next where I can spend my money? Then be told I can’t spend it overseas.
    I drawdown a little extra each month to cover my expenses. I budget and spend my money as I did during my working life.

    • 0

      just because you are encouraged to spend more does not mean you have to. You seem to be confident of your finances and able to budget accordingly.

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