Cost is one part of investing that people saving for retirement can control, and it’s surprising how the compounding impact of small cost savings build up to large amounts over a long accumulation phase.
Tag Archives | retirement income
The traditional asset based pension is not usually sufficient to provide a total income that keeps pace with inflation, even with the help of the age pension. A real lifetime pension is one way to preserve old age dignity.
With the availability of large pools of retirees, the law of large numbers will start to see a predictable distribution of lifespans around the mean, allowing for longevity risk products. An important development.
There has been a massive focus on the maximum allowed in a tax-free pension of $1.6 million, but what happens if your portfolio rises in value and you exceed it? Should you worry about it?
Increases in longevity, and the numerous changes to the super system since inception, have mostly worked against self-funded retirees. Meanwhile, politicians and bureaucrats enjoy far superior retirement benefits.
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.
Increasing longevity poses many challenges, including staying financially secure over a long retirement period. Retirees and governments must stay on top of healthcare costs.
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.
A reader asks whether people can stay off the age pension by reducing the amount of money they live on in retirement but not drawing on their capital.
It’s become common to claim there is no incentive to save more than $500,000 because of the loss of age pensions and possibly franking credits. But these arguments overlook the way super is supposed to operate.
Loss aversion means some people avoid annuities because a premature death may lead to a loss of capital, but lifetime annuities with death benefits aim to address this problem.
In retirement, it is the level of spending rather than investment returns which is the primary determinant of retirement outcomes, and there is a significant difference in spending patterns in later years.
For long-term investors who can tolerate short-term volatility, shares will deliver the best outcome including income in retirement. It’s cash and term deposits that are the long-term risks.
As Cuffelinks celebrates five years of publishing, I have chosen five of my favourite articles over that time, all of which deal with the ‘retirement income challenge’ one way or another.
We need different tools to measure success in the retirement phase, as many people become dependent on the cash flow from their super fund. The defined contribution system has failed to keep pace with retirees’ needs.
Understanding the rules for starting an account-based pension to fund retirement income is an important part of estate planning and should be done with expert guidance.