There is a good reason why investment firms recommend setting aside as much as possible for retirement: many people in or approaching retirement fall short of what they need to be comfortable, according to the Association of Superannuation Funds of Australia standard for a comfortable retirement, so the adequacy question is real enough.
But it is a discussion with two sides, and increasingly data and research is pointing towards an unexpected issue which is that people in retirement appear to be being unnecessarily frugal.
While it is generally not smart (or sustainable for most people) to go out and spend at will (or to eat nothing but ice cream), a good way to view the spend / save relationship is through an "everything in balance" approach.
A comfortable retirement is a long-term goal, and you need a plan to achieve it. Consistent contributions via a diversified, low-cost portfolio are a good place to start. Ideally start young so that compound interest can help you across the finish line. Avoid unnecessary debt. Do all these things, but if you also love model railroads, crave a baking career, or just want to visit Coober Pedy before you die, isn't that part of the reason you are saving today?
Ideas for matching your financial planning to your personality abound. You are no longer locked into logging every dollar you spend into a spreadsheet, unless you like doing it that way. There are lots of neat new online tools to help with budgeting, saving and keeping track of spending that can work for you.
One of the strengths of the Australian super system is its mandatory contribution regime but when it comes to drawing down those hard-earned savings in retirement the system is still immature, so it is not surprising that people are conservative about drawing down from super when they (a) don't know how long they will live for (b) what investment performance they can expect or (c) what provision they need to make for health and aged care costs as they grow older.
Government regulations dictate that we have to withdraw minimum amounts from our super pensions each year – for those aged under 65 that starts at 4% a year, rising to 5% for those between 65 and 74 and so on until it reaches a maximum withdrawal amount of 14% for those over 95.
The government rules are designed to ensure that savings that benefited from super's tax concessions eventually come out of the system. So these rules are driven by tax policy and were never intended to be the recommended way for retirees to spend their super.
But in the absence of any other guidance, it is hardly surprising that many people treat these as recommendations and only withdraw the minimums, just as many people only save the mandatory 9.5% in the savings phase.
So while there is understandably a lot of focus on saving enough in super to pay for retirement, perhaps the next focus needs to be helping people develop lifestyle spending plans.
Remember too, that many of the personal finance numbers you see are averages and may not be relevant to your situation. Some of you may inherit a portion of the estimated $2.4 trillion in wealth expected to be transferred from Baby Boomers to the next generation. Longer lifespans also may mean you can work and earn for more years than previous generations did.
Now, sit down, scoop yourself a healthy-sized portion of ice-cream, and start planning.
Written by Robin Bowerman,
Head of Corporate Affairs at Vanguard.
25 March 2019
For more than 20 years, Sam has been a financial planner helping individuals and families achieve their financial planning goals, by providing advice on Investment Planning; Insurance Planning; Tax Planning; Retirement Planning; and Estate Planning. Working with a network of highly skilled professionals in Sydney he is dedicated to providing high-quality advice and integrated wealth management solutions that simplify and enhance the quality of his clients' lives.
Sam established his own firm in 1997 and has overseen its steady development and growth. Attention to detail, good listening skills and great empathy are symbols of his appreciation by his clients. He has built long-term relationships with his growing client base and aims to provide excellent customer service.
Sam began his financial planning career in 1993 after completing a Bachelor of Science degree in 1991. Since this time he has accumulated many professional qualifications such as:
Sam has volunteered with the Cancer Council of NSW and can be seen almost every year volunteering or participating in the 7 bridges walk.
Away from the business, he enjoys spending weekends with his son. He is also a football (soccer) tragic and is a massive Chelsea FC fan.
Having worked for national financial planning companies in the past, George has extensive experience in the provision of advice in risk insurance, investments and retirement planning and is focused on forming long-term relationships with his clients.
George has been awarded a Masters of Commerce (Financial Planning) and a Bachelor of Commerce through University of Western Sydney as well as having the Diploma of Financial Services (Financial Planning).
Jane Lim is a friendly character with a bubbly personality. She has the unique ability of making complex information sound simple and easy to digest.
Jane entered the financial services industry in 2006, and worked with big blue-chip financial companies such as Count Financial Limited and AMP Financial Planning Pty Ltd.
She holds a Master's degree in Applied Finance through Macquarie University, and she is a member of the Million Dollar Round Table.
Being a self-confessed "tennis nut", Jane spends many weeknights in the tennis court, and is a frequent member of Sydney's Eastern Suburbs Tennis Competition.
Being a highly motivated professional, Jane is always eager to help her clients on a wide range of financial planning needs.
Paul has been a financial planner for over 15 years helping individuals and families successfully achieve their financial planning goals. He is very focused on building successful long-term harmonious relationships with his clients.
He provides a holistic approach on various aspects of financial advice encompassing areas such as Investment Planning; Insurance Planning; Tax Planning; Retirement Planning and has extensive experience and knowledge in these fields.
Paul's professional qualifications are:
Away from his professional life, he enjoys spending his time with his family doing various activities such as coaching his son and taking him to games. He is a very avid sports fan and a cricket enthusiast.
Client Services Manager
Christian joined Capitalwise as Client Services Manager, with backgrounds in both customer service and administration.
Christian is passionate in providing excellent customer service by being attentive to client’s need as well as being able to circumnavigate challenges.
He holds a Master's degree in Commerce specialising in Marketing through the University of New South Wales.
Volunteering is one of his delights in life, where he had spent time being involved with the Centre for Volunteering, St Vincent de Paul's Society, and Sculpture by the Sea in a variety of positions.
Jenny is a University of New South Wales graduate who joined the team as an Administration Assistant. She is keen to put her customer service and organisational skills to use, making sure day to day operations run as smoothly as possible.
Outside of work, Jenny focuses her efforts on karate and ice hockey. She can often be found coaching and practicing karate at her alma mater. The rest of her time is spent at one of Sydney’s many ice rinks playing, practicing, or officiating ice hockey.
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