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Nobel laureate recommends changes to Australian super system

Robert Merton, who was awarded the Nobel prize for economics in 1997, has recommended that the Australian superannuation system needs to rethink the way that it communicates with people about their retirement savings. Merton, who has spent the last decade studying retirement savings systems, believes that the Australian system is too focused on lump sum amounts, and should be regarded to make investors think about their future income streams.

“We are teaching people to look at the wrong number,” Mr Merton said in an interview. “What is a good retirement is measured by the standard of living you want in retirement, and standard of living is not defined by a pot of money but a stream of income. A good amount for retirement would be to sustain the standard of living you have become used to enjoying in the later part of your working life. That is an income goal; it’s not a wealth goal.

Merton also claims that the Australian super system needs to improve services in the pension phase of retirement savings.He claims that too many products that are classified as low-risk investments actually have highly volatile income streams, and retirees are given insufficient information from superannuation funds in regards to deciding when and how to withdraw their super.

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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.