CALL US: (07) 3367 0999 | EMAIL US:

Managing longevity risk and your superannuation

Longevity risk is a common and important factor to consider when planning for your retirement funds. Longevity risk refers to the risk of outliving your savings and arises as people enter retirement, and in most cases, with a fixed amount of money to use during their retirement years. Managing your longevity risk is important because retirees often have no idea of how long they will need their retirement funds for. Here are a few strategies to help you manage your longevity risk:

Purchase an account-based pension:

An account-based pension is a regular income stream you can buy with the money from your super after you retire and reach your preservation age. When buying an account-based pension, you can choose how much of your super funds you’d like to transfer to the pension phase, the size and frequency of your payments (within a set limit) and how you want your money to be invested through your pension.

If you were thinking of purchasing an account-based pension to begin with, now may be the time as the Government is temporarily reducing superannuation minimum drawdown rates for account-based pensions by 50%. The annual payment as a percentage of account balance currently has reduced rates between 2% and 7% (from age brackets from 55 to 95+ respectively).

Set up a lifetime annuity:

Lifetime income annuities and insurance products designed to provide income throughout your retirement. Annuities are bought from insurance companies with a lump sum of cash and in return, you can get regular income payments until you pass away or for the amount of time you’ve agreed upon.

To make sure you purchase the right annuity for your desires and circumstances, it is often wise to consult a financial adviser before making your decision or go through a reliable insurance broker. In the case that you’d like to avoid paying commission fees from an insurance broker, you can also purchase lifetime annuities from investment companies rather than a traditional insurance company.

Age pension as a safety net:

While there are a number of retirement safety net options available to retirees, age pension is the most obvious and most reliable. An age pension is a means-tested Government-backed safety net for retirees who are unable to fully provide for themselves in retirement. While a stable income stream to take note of, age pensions usually only provide their recipients with the bare minimum and hence considering some of the strategies listed above will give you more leeway with your funds and lifestyle after retirement.

Business
advice

taxation
planning

compliance
services

News

Transition to retirement

November 25, 2020

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.