‘One size fits all’ approach doesn’t suit retirement
Big data shows that location can significantly impact the cost of living in retirement, but the majority of super fund members don’t receive personal advice, which leads to a ‘one size fits all’ super recommendation that doesn’t reflect reality, according to the Milliman Retirement Expectations and Spending Profiles (ESP) report.
The analysis showed the Melbourne area of Stonnington was home to Australia’s biggest spending retirees, with the average annual expenditure of retiree households sitting two-thirds higher than the national average of $33,943.
The Caboolture region in Queensland was home to Australia’s lowest spending retirees, with average annual expenditure at $26,286 a year, 26 per cent lower than the national average and a figure that could be entirely funded by the full Age Pension.
While Stonnington boasts the high-rollers, the super balance required to sustain average spending through retirement for a couple in the area is over $403,000, which is still lower than many industry forecasts.
The results suggest the industry recommendations don’t accurately reflect the reality as the bulk of super fund members don’t receive personal advice, which could potentially make retirees in wealthier suburbs complacent while those in poorer suburbs become disengaged.
Milliman pointed to issues with using CPI as a benchmark as, for example, falling prices of discretionary goods and services could distort the true impact of non-discretionary costs.
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