A regular review of interesting cultural shifts & marketing developments as viewed through the collective lens of the Stancombe Research + Planning Team

Thursday, February 19, 2009

Not so easy to live long and prosper

This will probably come as a shock to most people, but losing money isn't the biggest financial risk you're going to face in retirement. The real question is how to make your money last as long as you do.

Think about it for a moment. A typical self-funded retiree leaves work with what seems like a healthy swag of savings - $500,000 is not unusual. They purchase a retirement pension to pay them a nominated income each year and assume they have enough to live on. Half a million, after all, is nothing to sneeze at.
But if they retire at 60 on an annual income of $40,000, their money will run out by 77 if their fund earns 7 per cent after fees. At last count, the life expectancy for a 60-year-old man was 82, and for a woman, 86. Takes the gloss of that half a million, doesn't it?
And don't forget, many of us will live longer than the average. Of those who reach 65, more than one in two women and one in three men are likely to make it to 90.
So if you think your super looks sick after last year's investment losses, spare a thought for the self-funded retirees who were expecting their savings to see them through their twilight years. Not only do they have to find a way to claw back what they've lost, they've got to stretch what's left for another 20, 30 or even 40 years.
That's why the Government's decision to ease its requirement for minimum pension drawdowns this year should be welcomed. While the critics will argue it benefits the well-off, the fact is that self-funded retirees have been among the hardest hit by the financial crisis.

1 comment:

  1. thanks that was really interesting and not something I had ever thought about

    ReplyDelete

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