How to ensure your retirement will be plagued by worry and uncertainty They have been called the golden years, but they’ll turn to tin if you make these mistakes, writes Janelle Ward.
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hether retirement is warmly embraced or sleeplessly feared can be the difference between planning well ahead of time and heeding the mistakes of others or being unprepared and unwilling to seek help. With that in mind, here are the retirement moves you don’t want to make.
1. P lace your super in the lowest risk investment category Your super fund invests your money for you. You can choose from a range of investment options, from conservative to growth, and move your funds as you wish. When COVID first hit, there were reports of many members shifting to cash or conservative options. Better to be safe than sorry, right? The problem with that strategy was that in the 202021 financial year, even the worst-performing super funds recorded double-digit returns. Funds left in cash or conservative options did not share in the glory. In late July, Association of Superannuation Funds of Australia’s (ASFA) chief executive Martin Fahy reported that super results had been the strongest in nearly 30 years. In terms of super funds generally, Mano Mohankumar, senior investment research manager at data and analytics provider Chant West, says that over the longest period able to be measured, Australia’s major super funds have delivered on their promises to members to grow their wealth in real terms and protect them from undue risk.
great way to invest, and people should be confident entrusting their savings to the major Australian funds that are among the best in the world.” If you have a MySuper account, you’ll most likely have a balanced, single diversified option. But it pays to check. And while you’re there, consider how you can bolster your nest egg and reduce tax through salary sacrificing and voluntary contributions.
2. Don’t draw down sufficient funds from your super pension account The federal government’s Retirement Income Report found the current minimum drawdown rules that apply to account-based super fund pensions – and which have been temporarily halved due to the pandemic – are being viewed as an anchor or guide by many retirees as they spend their super. Mercer research shows that about half of all retirees drawing on their super do not exceed the required minimum amount.
Too many retirees are focused on asset preservation US asset-management giant T. Rowe Price says: “Conventional retirement income planning assumes that retirees want to maintain a certain standard of living or a certain level of spending and attempt to generate enough income to support that spending level.
“That’s a great achievement,” he says. “And it’s a message that should be conveyed as widely as possible. Super has proven to be a 4
YourLifeChoices Retirement Affordability Index™ August 2021
