Fear of running out of money plagues retirees

Many Australian retirees fear running out of money with the result that up to half of them are spending less than the age pension each year, according to the latest research from Milliman.

A Milliman report, released this week, confirmed other research pointing to the essential conservatism of Australian retirees when it comes to tapping their retirement savings and pointed to the need for greater understanding about why retirees are so fearful and what can be done about it.

It said running out of retirement savings represented a key concern for many people given that a 60-year-old man was now expected to live for a further 26.4 years and a 60-year-old woman for 29.1 years, according to the Government’s 2015 Intergenerational Report.

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The Milliman report said this concern might be a driver for the substantial proportion of retirees with account-based pensions who draw down the minimum legislated annual amount.

The report analysis said the findings suggested that mandatory and voluntary measures to boost superannuation might not be enough to produce improved retirement lifestyles without a deeper understanding of the motivations driving retiree behaviour.

The Milliman analysis suggested superannuation funds should be seeking to obtain more information from their members about what might be driving their fears.

“What is certain is that more information is needed – something funds can obtain directly from their members,” the report said. “In this way, super funds’ general advice can be better aligned with the actual experience and needs of members.”

The said such an approach could be part of an important – and broader – conversation about the adequacy of older Australians’ living standards after a lifetime in the workforce.

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FOROM !! Ironically what i am finding is that they are running out of good healthy years, and end up housebound with excess capital. money they cant really spend as they are no longer able to travel due to health issues for one or both.

Yes, that's not going to change much either, due to the new harsh asset test in place. If a couple sells their house to free up capital, it can cost them $700,000 in future pension (in today's dollars]

Hi Mike. This is an important article, but Australian retirees are not the only ones as show by this This has been well known by the financial planning community for more than twenty years e.g. David Williams website What is required, also well known, is for the Financial Planning Standards Board to change its policy to include the impact of retiring part time (AARP terminology: on the longevity of retirees funds. However, fortunately for global retirees Christine Lagarde, the Managing Director of the International Monetary Fund is now aware of the need for this happen, but it comes under the heading of The Future of Work . You can see the IMF Forum on the New Economy and the Future of Work here:

It is a legitimate fear of retirees!

Interestingly, Amazon has identified this issue long ago and built the platforms to change financial services globally. I believe that the number of employees globally has passed 500,000, but that figure would be dwarfed by the businesses, contractors and freelancers using their platforms e.g. Amazon Web Services.

It is very timely for the Royal Commission into Banking and Financial Services where the need to discuss these issues and the need for reform can be spoken about publicly. Not to do so would be negligent for future retirees.

Well done. Thank you for bringing this critical issue into the public arena.

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