Retirees’ mental challenge in shifting to decumulation

Helping retirees with the mental shift from accumulation to decumulation is a key role for financial advisers as they see the opportunity to help the retire-ready market, according to Vanguard.

Speaking at a Vanguard webinar, Jeremy Duffield, who founded Vanguard’s Australia and Asia divisions, said three particular factors were contributing to the need for advice for retirees.

There were 250,000 people retiring each year and 3.9 million aged over 65 in Australia, he said.

The three reasons were growing numbers of older Australians, insufficient numbers of advisers and signs that the regulatory framework was helping retirees.

• “The pre-retiree and retiree population is growing dramatically, while the complexity of the retirement challenge means people can’t go it alone;
• The supply of quality financial advice is insufficient to meet the needs of retiring Australians. The number of financial advisers has fallen sharply, while super funds often lack the ability to address the non-super side of the equation; and
• The government views affordable and accessible advice as key to addressing the retirement challenge. We see early positive signs that the regulatory framework will change to support rather than hinder advice.”

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A particular mental problem stemmed from the mindshift from accumulating assets to spending those assets.

“Retirees need help in tackling this transformation, it’s a tough transition going from being an accumulator of assets throughout your career to creating a retirement income stream. That’s one very big mental mind shift.

“Everyone has to align their retirement life with their financial situation, their own financial reality and that’s very hard to do. It is a challenge to work out how long your money will last and how much you can afford to spend. That’s why people need financial advisers.”