How retirees can overcome fear of outliving their savings by guaranteeing an income for life.
The Baby Boomers are moving from saving superannuation to spending it, and the transition has everybody worried.this week, Treasurer Jim Chalmers said retirees were living too frugally because they feared they would run out of superannuation before they die – something called longevity risk.Super funds would therefore need to come up with better ways to give members the confidence to spend their savings, Chalmers said.
But annuities, which are fixed-income products used to provide guaranteed returns, are “kryptonite” for many retirees because of concerns about low returns and the possible impact on estate planning, according to Alex Dunnin, executive director of research and compliance at Rainmaker Information. Geoff McClelland, a former IT specialist and self-funded retiree who finished working last year, says guaranteed income products have a place for retirees who want to buy a regular income.
“Most people would prefer to go to a marriage counsellor followed by a dentist than talk about money,” says Anne Fuchs, chief of retirement for Australian Retirement Trust , which has 2.3 million members and $260 billion under management.The trust is a leader in designing “new generation” products intended to bridge the retirement advice gap.
Aspire Retire boss and retirement specialist Olivia Maragna says many retirees are focused on leaving an inheritance for family members.Rainmaker’s Dunnin adds: “Super members vastly prefer account-based pensions, no doubt because they are easier to understand, are much more flexible, have more investment choice and since they are market-linked, would likely pay better pension benefits.”
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