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The wasted money in super
Retirees are likely to waste as much as 30% of their superannuation in retirement by failing to spend enough.
Speaking to Super Review, Aaron Minney, head of retirement income research at Challenger, said people were often failing to spend enough of their pension as it was difficult to work out life expectancy and they feared running out of money.
Minney, who was also appearing at the JANA Annual Conference this week, said: “People are only spending the minimum because they don’t know how much they can take, it’s too low, it should be 6% rather than 4% and some funds are actively suggesting people take 6% now.
“Because they are spending too little, they are likely to be leaving super behind when they die, around 25%-30% likely wont be used which means they are wasting almost a third of it. This is wages they’ve saved over their working life and they should be able to spend that and funds should be helping their members to do so.”
Current retirees only had small amount balances but the problem would become more significant as people who had been saving into super for most of their working life began to move into the decumulation stage. The most-common method was via an account-based pension.
According to Australian Taxation Office (ATO) data, as of June 2020, the median balance was $161,000 for men and $129,000 for women.
“This means for a couple, they have around almost $300,000 to work out what to do with, they won’t be entitled to the full Age Pension and the funds need to help them decide,” Minney said.
This would be helped by the Retirement Income Covenant as funds began to make detailed plans on retirement income strategies for their members. The plans for these had varied between funds and Minney said he expected retirees would compare super funds on their different plans in the future and potentially switch fund.
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
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Difficult to see how Aaron Minney might say unspent super from retirees is a 'waste', given the relentless warnings about running out of savings, increasing longevity with the effects on physical, financial and relationship resources unknown, our taxing the living but sparing the departed absent gift and inheritance taxes. Hayne RC showcased how many planners were adept at securing their own retirements, pity about the clients.
It is called prudence and playing by the rules.
What a thoughtless article by the author using the same article as the Liberal Party did when they were in power. If this is the case, should retirees spend all their investments external too retirement accounts? Superannuation is another form of accumulating wealth to be utilised when the time is right. The author belongs to the same think tank who want retirees to either spend the equity value of their homes or downsize. So dumber and dumber.