“LEARN FROM THOSE OLDER THAN YOU AND PLAN THE LIFESTYLE YOU WANT”

“LEARN FROM THOSE OLDER THAN YOU AND PLAN THE LIFESTYLE YOU WANT”

by | Oct 16, 2020 | blog, Resources

As we wait for the Retirement Income Review report to be released, we thought we’d ask one of our very own, George Georgiou, how he feels personally about getting closer to retirement and find out just how good the superannuation system, in particular, has worked for him.

George, please tell us a bit about yourself.  What are your likes, dislikes?

I’m in my 60s and married with 3 adult daughters. I enjoy spending time with family and watching my beloved Tigers. What I dislike is spending time commuting and seeing the Tigers lose!

What’s your dream retirement?

It’s important to me to retire with good health, and not ‘work myself to death’, so whilst I am feeling ok and making a contribution I will keep working. The move to working from home has helped me a lot, not having to travel for 3 hours a day. This has been a factor in my thinking about transitioning to retirement in a stage approach. Once I retire, I think there will be some travel, local and overseas, but spending time with family and friends will be important to me.

Are you likely to live out your dream retirement?

I hope so – the cost of living is going up all the time, so I keep trying to put money into areas that will save me money once I am retired – home renovations are top of the list.

What will be most important to you in retirement?

The most important things for me will be good health – to be able to do the things I want to do; no pandemics to interfere with my holiday plans; and an income – that supports the lifestyle I want to have.

Have you planned for your retirement and if so, how?

I am putting some extra dollars into super each pay day to help boost the final balance. I am making sure that I don’t take have any debts when I get to retirement age. Also, we are looking to manage our lifestyle to spend less each week.

What has the current pandemic highlighted for you and does this affect your plans?

The pandemic has made me realise how much time was lost travelling into the office every day. Working from home will now be a constant part of my remaining work life. I feel that I now have the ability to work longer than might have been the case if I had to continue to commute every day to work.

How do you feel about getting closer to retirement?

I am reasonably confident as my super balance has not been greatly impacted by the pandemic – a zero return for the last year is about all I could have expected. Using the calculator on my fund’s website says I need to keep contributing a little extra regularly to my super to ensure my retirement income meets my lifestyle.

What has your experience of the superannuation system been like?

Super is a very major part of my retirement planning. I only moved from a retail fund to an industry fund 5 years ago and, looking back, I wish I had moved earlier. The clarity of the reporting from the industry fund has made it much easier for me to understand where my money is invested and the returns it is generating – this was not there 5 to 10 years ago.

I feel that having the flexibility to choose where my money is invested is a positive feature, especially if you believe that you would prefer your savings to be invested in the industries you support rather than those selected by your fund’s investment committee.

As you get closer to retirement, what message do you have for people younger than you?

I encourage everyone to look at the lifestyle of your seniors or parents, and ask if they have the lifestyle that you would like to have when you reach their age.

Consider how they have achieved that lifestyle, positive or negative, and ask yourself what lessons you can learn from their position. Then, set the plans in place to achieve your preferred retirement lifestyle.

By George Georgiou (Principal Consultant)

Retirement Income Review: Robust or Rabbit Hole?

Retirement Income Review: Robust or Rabbit Hole?

by | Sep 24, 2020 | blog, Resources

“Every system is perfectly designed to get the results it gets.” Donald Berwick

With the release of the Retirement Income Review (RIR) expected soon, let’s take a moment to reflect on why it’s so eagerly awaited and what it might mean, particularly for those in the superannuation industry.

Despite the RIR being delivered to Government back in July and the Federal Budget due to be delivered within three weeks, no date has been announced for its public release or when Government will provide comment.

The objective of the RIR is to establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians.

The COVID-19 pandemic did not change this objective, but certainly added an extra layer of complexity that Government will need to consider prior to offering any commentary. However, while the industry awaits the report’s release, speculation is growing about what it contains. The longer the delay, the more time groups have to campaign in the media on several topics, including the hotly contested Superannuation Guarantee (SG) increases and early release scheme for first time home buyers.

According to the Grattan Institute, just over 50% of submissions on the RIR related to superannuation and 30% related to the Aged Pension. Of course, for many, superannuation is synonymous with retirement and it is on the super component that I will comment on in this post.

It is on proposals for ongoing superannuation early release that Australia needs to tread lightly. It would be irresponsible to break open the piggy bank for purposes other than the intended purpose of catering for an adequate retirement income. If this becomes the norm, many retirees may become fully dependent on the Aged Pension which will not only impact their quality of retirement but also place unnecessary strain on the system. And down the rabbit hole we go.

Despite strong economic growth and investment returns over the past 28 years that enabled a comfortable retirement (for some), the calls to keep SG flat need to be considered (and then be rejected) against the backdrop of an aging population (16% of the population is now over 65); increased life expectancy; changes in home ownership that means retirees are more likely to carry mortgage dept at retirement; low wage growth; and low returns on fixed interest investments impacting savings for retirement. Also, let’s consider for a moment, that retirement provisions for low and middle income households are more likely to feel the negative impact of static wages and low fixed investment growth than those who were able to fully partake in the 28 years of growth.

Australia’s retirement income system is the envy of many around the world. The RIR is timely and the objectives noble. In times of crises (like the current pandemic) we should be practical rather than align purely to some aspirational system. That said, let’s hope that interpretations of the RIR Committee’s observations, and subsequent implementation by Government, remains true to the purpose of the superannuation system and aren’t based on populist choices just because it is easier in the short term.

Australians deserve a robust system that can tick the boxes of adequacy, equity, sustainability and cohesion and we look forward to seeing how the Government will place the sign posts for the industry to achieve this. IQ are ready and waiting for the report’s release and look forward to working with clients to deliver the results, improve the system and ensure we stay well and truly away from the rabbit hole.

By Jaco Van Tonder (Principal Consultant)