Episode 11: How to make your money last through retirement

8 September 2023

Retirement is a major milestone in most people’s lives. But making sure that our money lasts throughout retirement can be a worry, and sometimes even a challenge.

Don’t miss Australian Retirement Trust’s Senior Manager of Advice Delivery, Luke Caruana in conversation with host Anne Fuchs as they discuss how much super is needed to retire comfortably, options for accessing your super in retirement and what you can do to help make your super last.

Anne: Hello and welcome to Super Insider, Australian Retirement Trust podcast series on investing the economy and making sure you retire well with confidence. Today we're in Meanjin, otherwise known as Brisbane, and I'd like to pay my respects to the Turrbal and Yuggera elders past, present and emerging. Now my name is Anne Fuchs, I'm Executive General Manager here at Australian Retirement Trust and I'm responsible for advice, guidance and education for our 2.2 million members to help them make the best possible decisions so that they can put their feet up and enjoy their retirement.

With me today is someone who plays a massive role in that respect, helping out those 2.2 million members. Luke Caruana, Senior Manager of Advice Delivery here at Australian Retirement Trust.

Hi, Luke.

Luke: Hi. How are you going?

Anne: Yeah, good. It's very exciting to have you here. We work together day in, day out, the you know, the team. And so it's really good to have you here.

Luke: Great to be here. Looking forward to talking all things retirement.

Anne: Now, before we do that, though, it's obviously very important we know this, particularly in financial advice, that Compliance is happy with us. So, I just want to provide our general advice warning for our listeners. I need to let everyone know what we're going to talk about today is general information only. Any advice doesn't take into account your personal situation.

You should consider your circumstances and think about getting personal financial advice before acting on anything we discuss. You should also consider the relevant Product Disclosure Statement and Target Market Determination before deciding to acquire or continue to hold any financial product. You can find this information on our website or by calling us on 13 11 84. If you're a Super Savings account holder or 1300 360 750 if you have a QSuper account.

Okay. Luke so the concept of a, the concept of retiring well with confidence is something we speak about at Australian Retirement Trust every day because it is our singular purpose for coming to work. What does that even mean? Like, you know, the average member would say, well, how much money do I need to retire well with confidence?

Luke: Yeah, and look, it's a really good question, but when we're speaking to members, often we say it's not the right question. So, a lot of members will come to us and say, I need to get to two hundred thousand dollars in super, I need to get to five hundred thousand or some might even say I need to get to a million dollars in superannuation.

What we try and talk about is not really the amount of superannuation, it's what it will provide for you, what it will give you in retirement. So those are the really important conversations that we're having with members every day about what do you need? What does your retirement look like? And what do you need from your superannuation to actually generate that income in retirement and make sure that it lasts for you as well?

Anne: And I guess every everybody is different. You know, superannuation as a system is, in accumulation phase it's a very collective experience but, when you get to the end of your working life, it is the circumstances are so individual. What are the things that members need to be thinking about to determine what is the right amount of money for them?

Luke: Yeah, I think you're right there Anne, individual is really the key to it all because again, often people, you know, when we're speaking to them, they've been working for decades. They've been saving, trying to accumulate, pay off their mortgage, raise children, all of those sort of things. And then as you're preparing for retirement, it's really about saying what's the sort of retirement that you want?

So it's important to start thinking about what do we want retirement to look like? What sort of things will we be doing? How early do I want to retire? Do I want to do part time work? Because all of those factors will really change the answer for you as to how much money is enough. Most common question we get when people are speaking to us at Australian Retirement Trust is, how much is enough?

But you would see from some of those things that I mentioned, that there isn't just one answer. It really is an individual answer for each individual person.

Anne: And so, I guess depending on how physical your role is, you're probably more likely to be very keen to maybe wind back the hours earlier because you're tired.

Yeah, exactly right. Or look for a career change, right? You know, these are the these are important things because a lot of members really do focus around sixty. Got to get to sixty. I can't really work beyond that. But we have members working in their seventies and happy to do it. So again, it really comes down to what do you want your retirement to look like?

Luke: What are you preparing for? And that will help you sort of answer those questions, because when people speak to us, then we can really help them plan out what's going to work for them and their family. To your point, some people work very physical jobs, some people are also caring, so, they might be working, caring for a partner, caring for children or elderly parents.

These really change what they need out of work and then therefore what their retirement could look like beyond that.

Anne: Now, obviously superannuation has been in existence now for thirty one years and there are some members that have been paying attention the whole time and there are others that have not paid attention until they've decided I need to finish work. But I guess if you were talking to one of those members and they were worried they didn't have enough, would you say that should prevent them from getting some advice? That it's too late?

What would you say?

Luke: No. What I'd say is it's never too late, right? Really, once you start paying attention to your superannuation, that is the right time to speak to us. What we often talk about there is helping people get organised. So we get members coming to us with multiple superannuation funds still. So, they're looking at, okay, how do we get this to work for them? Looking at how the money is invested, so how much risk they're taking, what their investments could provide for them in retirement.

Things like insurance. People start to look at their statements at these stages when they're getting ready for retirement and look at, what fees am I paying? What's this insurance? What’s it cover...

Anne: Do I really need this amount of insurance?

Luke: Yeah, what's it covering me for? If you're retiring in six months, then maybe you don't need the same insurance as you did when you were forty five. I mean, all of these things are really good opportunities to look at your superannuation and what it's doing for you. For most people it's the second biggest asset outside of their home and it really is the the main thing that's going to be providing you income during retirement along with any government benefits that you might get.

So, looking at it, asking questions. But to your point, no, I would say that it's never too late.

Anne: Never too late to pick up the phone and speak to us about some some of the I guess, the levers you could pull, you know, outside of those ones, there's things like additional salary sacrifice I'm going to throw over to you now.

Luke: Yeah. And look, you know, making extra contributions again, you know, we do get some members come to us and say that maybe it's too late for them. But any extra contribution that you make, it just makes such a big difference to your retirement. Organising your insurance, making sure your money is invested the right way, invested in a way that's comfortable for you.

Another thing that people look like at this stage is maybe downsizing, so, you know, they've got an asset in their home, maybe their focus all their energy in paying off their mortgage, and they're looking at, well, maybe we don't need this home, the kids have left…

Anne: I'm sick of mowing the yard.

Luke: Exactly right. We've got too big a house for just the couple of us that are still in the home. So downsizing does provide an opportunity where you can actually put extra into your superannuation. One of the things that people find as they get closer is there are limits in how much you can contribute to superannuation. But downsizer actually allows you to go over the top of those limits and really grow your superannuation while getting a sort of, your forever home and the home that's actually actually going to suit you in retirement.

Anne: So maybe to have those numbers at hand? In terms of, if our listeners are thinking about this is something right for them.

Luke: Yeah, exactly right. So, the normal contribution limits, so for people after tax, just putting money from their bank account or those sort of things, it's a hundred and ten thousand dollars a year and you have the opportunity to do three years at once. For downsizer contributions, you can put an additional three hundred thousand dollars each, so for a couple, if you sold your primary home downsized, you can put an extra six hundred thousand dollars into superannuation potentially, which would give it a really good kick along. But again, it depends on what's going to suit your individual situation.

Anne: And I guess there's also spouse contributions too. I mean, you spoke about the, you know, the caring army of this country. And, you know, a lot of them are my gender that are having to play catch up. We know that the fastest growing cohort of Australians in homelessness are women. So women particularly need to pay attention to their superannuation balance to make sure they're not in that, you know, very sad statistic.

Luke: Yeah, and this is another thing. It's really important to look at the whole family unit together because you're right, spouse contributions is one option. Splitting superannuation contributions between one partner or another is another one. And then also you start to get into what strategies you might have to try and get the most from Services Australia, from Centrelink, Age Pension, potentially Disability Support Pension, Newstart Allowance, even things like health care cards, they make such a difference because anything you can get from the Government to support your own retirement means that you're using less of your own money and making that last more and more for yourselves.

Anne: And I guess that is a thing that we are seeing, a theme, and I don't know if you have any personal reflections after speaking to so many members over the years that members do worry about once they've retired, you know, they've made those decisions, they're retired, they're maybe maybe being a little bit frugal and maybe they could be enjoying their retirement a little bit more.

Luke: Yeah, and this is something we see at Australian Retirement Trust, but it's also something the Government has noted in their reviews of the industry overall, is that obviously you have some members, some Australians who do spend their money quickly. But by and large the bigger issue I suppose is people being very frugal, having a lot of money in their eighties and nineties and just not having enjoyed the retirement that they potentially could of.

And so that's why from my perspective it's really good to sit down, speak to the superannuation fund or also get professional financial advice. You know, this is the time when it would just make such a big difference as you're preparing for retirement to get the most of you can out of your money, you know, getting to your eighties and having a big inheritance left to the kids, that's not what most people dream about when they are thinking about retirement.

They’re thinking about caravanning, or they're thinking about going overseas, or they’re thinking about renovating the home or being able to help their kids at that time, you know, set up things for grandchildren, those sort of things. I mean, that's what people really think about as retirement, you know, being, you know, in your eighties or nineties and giving a big inheritance is probably not what people dream about, typically.

Anne: No, you are right, and I think probably to your point about having that conversation about what a great retirement looks like is important.

Luke: Yeah, and look, there's lots of options. I mean, we've spoken a lot about, you know, thinking about what your retirement looks like. And that's very important, you know, budgeting is a bit of a dirty word, and you don't necessarily have to scratch down, we’re going to spend this much on groceries or this much at the hairdresser. But having a...

Anne: Don’t talk about that. Don't mention the war!

Luke: But having a really clear idea on what you want your retirement to look like is very important, right? Because otherwise you can get in this situation where you're very frugal, you don't want to spend any money and you just let the superannuation accumulate and grow in the background. So that's quite important to have a budget there. And then there are a number of options for actually giving you that income in retirement.

So a retirement income account is probably the most common one that people would know about. You know, basically turning your superannuation from a lump sum into a regular fortnightly income, got a lot of flexibility.

Anne: Tax, tax-free, fortnightly income.

Luke: Tax free, very, very flexible up and down can take out lump sums. So a lot of people do choose that option. But there are other options, you know, potentially with some Centrelink benefits as well that will give you an income for life. So ART has an award-winning Lifetime Pension.

Anne: Award-winning. He just dropped that in there accidentally, yeah.

Luke: Award-winning. But that's, you know, not as flexible but the trade-off is you're going to get an income for as long as you live. And we see a lot of members using a combination of different things. So, looking at an Income Account, looking at a Lifetime Pension, getting something from the Age Pension, maybe even doing a bit of part time work, and all of that forms their income that they actually get in retirement.

Anne: So, a question without notice, but a rule of thumb around people thinking about what's the right number for me, and they're probably looking at their annual salary and thinking, well, by the time I get to retirement, I'll have paid off my mortgage and I won't need anywhere near as much as that. So, what are your reflections of talking to members about what their expectations are compared to their salary today?

Luke: Yep, a rough rule of thumb is to use two thirds of your income. So, if you're on sixty thousand dollars, you might say forty thousand dollars is our benchmark. If you're on a hundred thousand dollars, you might be sixty-five thousand dollars as your benchmark. But really, again, to the point that we raised earlier, it is very individual because if you're still supporting children, as some people are in retirement, that would be different.

If one partner is still working, that would be different as well. But there's, you know, a lot of different answers, but two thirds is a very general rough figure. Again, to go back to the budgeting word, look at what you're spending, look at what's coming in now. If there's things that'll be gone, like private school fees or mortgage, you can sort of take those away and get a really clear idea of what you want to do in retirement.

Anne: So, Luke, final message. If a member is sitting and looking at their ART account and you know, we've had some stellar investment performance, which I've had Brian Parker on the Super Insider podcast series talking about, and they're thinking, oh, all right, I need to start paying more attention. I wonder how much I need to live on in retirement? What's your one sort of piece of advice?

Luke: Yeah, the one piece of advice is help is there. So, contact us. And I think really professional financial advice at this point is really, really worth it. Get an individual plan, look at what that would look like for you and your family and try and make the most of your situation.

Anne: Yeah, that's great Luke, and look for our older members, make sure you tell the young people in your life it's I keep I use this analogy, I drive everyone crazy at work with it. The slip, slop, slap. Like, you know, the, my mum's generation didn't put on sunscreen. And so, you know, the consequence was a lot of skin cancer.

This, my generation, have put on sunscreen so I'm hoping this next generation of young people are putting on their superannuation sunscreen which is code for know what you superannuation is, log in, know your account and start paying attention because the earlier the better. Luke, it's so, so fun to have you here on today, it's like we’ve brought our office into the super, Super Insider program, so great to have you. To our listeners you can share us on your social media, find us on Spotify, Apple Store, you name it. And and we'll see you again soon. Thanks so much.

Luke: Thanks Anne.

This podcast is brought to you by Australian Retirement Trust Pty Ltd (ABN 88 010 720 840, AFSL No. 228975) the trustee for Australian Retirement Trust (ABN 60 905 115 063) (the Fund).