Using the value of home equity built up over many years seems an obvious part of retirement planning, but reverse mortgages have been unsuccessful in Australia. Is it time for a fourth pillar of retirement income?
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The design of superannuation is part of a social contract, and people who do not understand the long-term context are often offended that super funds should be tax-free in retirement. Don’t blame Peter Costello.
Some retirement portfolios may never recover from a big hit to the balance just when contributions have stopped and withdrawals have commenced. The possible sequence of returns is another risk to focus on.
As the population ages and property prices rise rise, equity in owner homes has more potential as a significant source of ‘retirement income’. But an ASIC report highlights complexities in reverse mortgages not well understood.
Are the costs of accommodating and financing your adult children at home adversely affecting your retirement savings? Supporting family is important, but so is setting up your own comfortable retirement.
Retirement planning is often based on average expected returns, average expected cost of living and average life expectancy. But all of these variables can vary adversely, and we need more on the range of outcomes.
It is useful to think of your financial life and psychological adjustment in five stages: a family and career phase, pre-retirement, close to retirement, just past retirement, and then lifestyle downsizing.
Fund managers take different approaches to asset allocation, either leaving it unchanged in a ‘strategic’ position, or responding ‘dynamically’. Either way, multi-asset funds have many of the features retirees want.
There is much disagreement over the ‘safe’ withdrawal rate in retirement to ensure savings do not run out. Unfortunately, drawing only 2.5% from a nestegg will leave many retirees living a life on unnecessary austerity.
The method chosen to determine the amount of pension payments from superannuation should influence the allocation towards the volatility of growth or income-based assets.
Future retirees will be expected to be even more reliant on their own superannuation instead of the age pension. For the younger generation, your lifetime of investing should begin now, while time on your side.
The ASFA ‘comfortable retirement standard’ for a couple is only $58,128 per annum, below the average full-time wage. SMSF trustees should check these numbers as an estimate of how much and at what age before they retire.
The FSI’s Interim Report observed that the retirement phase of super-annuation is underdeveloped and does not meet the risk management needs of many retirees. The most difficult of these risks to manage is longevity.
As more people live longer in retirement, income from super and other assets needs to stretch further to ensure a comfortable lifestyle. History makes a strong case for some allocation to equities despite the volatility.