Don’t wait to start planning for retirement

Indeed, we shouldn’t be fooled by the word retirement. Planning for retirement needs to start from the time you start earning an income. And it’s why access to financial advice is not just important in the lead-up to and during retirement but right throughout one’s life.

While many Australians are working longer or more flexibly into retirement, the fundamental concerns they have around funding their retirement goals haven’t changed. As they do during their working lives, people want to be financially independent and confident when they finally reach retirement.

Thanks to the growth of superannuation, the Australian retirement system has primarily shifted towards a self-funded model for many. While Australians are reaching retirement with more savings than ever before, many are still worried.

Australian retirees can expect to spend around 25 years in retirement (ABS, 2024), and with dependents staying at home for longer, the cost of aged care increasing, and the changing dynamics of generational wealth transfer, retirement planning is far more complex today than it has been in the past.

For many approaching retirement, their biggest concern is making sure their savings or investments last the distance. In this landscape, optimising retirement outcomes must include first protecting the path to retirement. Today, retirement planning means everything from income generation, planning for aged care and unforeseen events, and helping clients make informed choices about their future.

Key to protecting retirement outcomes is having awareness of and planning in place to be able to manage unexpected shocks, such as illness, forced retirement or even caring responsibilities. The closer people get to retirement, the less viable alternative revenue producing options become. Limited time, health issues or other constraints can make it difficult to recover lost capital or continue working in older age.

Without recovery options, retirees become more sensitive to risk and naturally more risk-averse. When tragic or catastrophic events occur close to retirement, such as a major health event or accident that prevents a person from working, the impact on retirement goals can be dramatic.

Liquidating assets at short notice or in the event of an emergency can lead to undesirable consequences such as adverse tax implications or realised losses. This can materially impact people relying on assets to fund retirement income. Suddenly, what was a comfortable projected retirement balance at age 65 may now fall well short of expected longevity.

Unexpected loss of working capacity or major health events can pose a serious threat to both capital and income, critically undermining long-term retirement plans.

One way to help manage this risk during a person’s working life is through life insurance, including total and permanent disability cover which provides important financial protection in the event of a catastrophic event. Trauma cover also protects against the impact of a serious illness which can threaten your earning capacity.

And there is income protection, which is a fundamental building block for long-term financial security. Without adequate financial protection during their working years, Australians may arrive at retirement with higher financial stress.

Financial advice during various stages of life can help one navigate through financial ups and downs. The stages leading up to and during retirement are no different to ensure you are maximising your retirement pool.

It’s why the federal government’s proposed advice reforms are critical as they can help provide more Australians with access to much needed financial advice and will help to deliver better retirement outcomes for future generations.

Financial advice gives Australians more than just numbers. It provides the confidence and freedom to make informed decisions right throughout their lives. Perhaps even more importantly, it also provides critical insights on retirement years, long before they have been reached.

Gerard Kerr is chief executive, individual insurance, for Acenda.