It’s no secret at the moment that retirement confidence remains low. Recent ASFA data has shown that Australian couples 65 and over will need more than $75,000 a year to maintain a comfortable lifestyle.
Accordibng to AMP research, more than half (54 per cent) of Australians aged 58–60 said they often feel stressed or overwhelmed when thinking about their finances, while the figure stood at 50 per cent among those aged 61–65.
The combination of low confidence and rising costs compound several fears, one of the most profound of which is retirees outliving their savings.
“They’re not actually afraid of living to 100. They’re afraid of running out of money. They’re still afraid of spending too much and not having enough to last,” Ben Hillier, director, retirement at AMP, explained to an ifa Webcast.
“And so, they underspend, they invest too conservatively. They do the worse possible things when markets crash.”
This becomes an even more complex issue, according to Nathan Fradley of Fradley Advice, for advisers when clients either in or approaching retirement begin to worry about the legacy they are leaving behind.
“There’s going to be a natural tension between providing income for me, and me living a good life, and the sandwich generation’s constant need to make sure everyone else is okay and not go on a holiday, make sure that the kids can inherit the money instead of spending it themselves,” Fradley said at ifa’s Evolution of Advice Summit.
“That will open a conversation, which then becomes more about certainty of outcome, future estate value, beneficiaries, who is this for.”
Speaking on the same panel, head of technical services at Challenger Andrew Lowe echoed Fradley’s sentiment.
“There’s a natural tension between living a good retirement and preserving wealth for the next generation. A lot of people would rather make sure the kids inherit the money than spend it on themselves.”
The adviser’s role in this situation is not to make the client pick lifestyle or legacy, but provide a level of certainty, whether that be highlighting that their financial situation might not be as precarious as it may seem, or directing them to retirement and super income products that suits their needs.
“What many Australians are looking for is certainty in an uncertain world. Four in five people we surveyed said they would be happier with a secure source of income that lasts for life in retirement. With that increased certainty comes increased confidence to spend,” Lowe told the panel.
Fradley added: “There can be this natural resistance because people are retiring after seeing the landscape change over decades. They’ve seen brands come and go, and they want confidence that what they’re entering into today will still be there tomorrow.”
