On paper, a long life after retirement seems ideal. However, as myriad studies and surveys demonstrate, it’s one of the greatest causes of anxiety among pre-retirees and retirees.
The issue? Many are scared they will outlive their savings.
“Some of the really deep feedback we got is that advisors are actually spending a lot of time trying to help their clients actually spend money in retirement, because they don’t have the confidence to actually spend it,” Marrisa Powe, executive director of retirement at CFS said in a webinar.
“It surprised us how much time advisors had to support their clients really spend that money.”
Amanda Gardner, head of platform partnerships at Challenger, echoed this sentiment.
“Retirees face longevity risk, the risk of outliving their savings, or on the other side, not spending enough because they’re unsure how long they’re going to live and how long it needs to last for, as well as inflation risk.”
As illustrated in AMP research from September last year, these fears invariably drive low confidence in retirement.
“The rising cost of living and surging household expenses have seen the annual cost of a comfortable retirement climb by more than $13,000 in just five years,” AMP said at the time.
“With new ASFA data showing Australian couples aged 65 and over now need more than $75,000 a year to maintain that lifestyle.”
Powe said the feedback from advisers about the need to help clients spend formed part of CFS’ broader retirement strategy review, which found advisers increasingly need tools and solutions that address behavioural challenges alongside traditional investment concerns.
“What we continue to hear is that retirement continues to be complex, and everyone’s individual needs are very, very different. There’s certainly nothing that is universal,” she said.
“Our members and your clients are still trying to navigate their income, their longevity needs, dealing with inflation and also managing income and wealth transfer across decades.”
According to Gardner, those challenges are making retirement income solutions more relevant as Australians live longer and spend more years in retirement.
“When you pull all of that together, you can see why lifetime income is more relevant now than ever before,” she said.
