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The question of ‘how big is enough?’ misses the point on what matters most to Aussies in retirement, AMP’s Melinda Howes says. (Source: Getty\/Yahoo Finance) <\/p>\n The question of ‘how big is enough?’ misses the point on what matters most to Aussies in retirement, AMP’s Melinda Howes says. (Source: Getty\/Yahoo Finance) <\/p>\n
ASFA\u2019s Comfortable Retirement Standard<\/a>, released last month, is a useful checkpoint. In a system built on balances and benchmarks, it gives Australians a practical anchor for what \u2018comfortable\u2019 retirement<\/a> might cost in today\u2019s dollars, grounded in real spending.<\/p>\n They estimate the annual cost of a comfortable retirement<\/a> for homeowners is $54,840 for singles and $77,375 for couples. For couples, they suggest that the \u2018lump sum\u2019 required to fund that lifestyle has risen to $730,000.<\/p>\n A useful reference point, but the problem with benchmarks like this is that if we frame retirement success<\/a> primarily as \u2018hit this balance\u2019, we risk leaving Australians anxious, over-conservative, and under-supported in the most important financial transition of their lives.<\/p>\n RELATED<\/p>\n Because the question of \u2018how big is big enough?\u2019 misses the point on what matters most to Australians in retirement<\/a>. That is, will my income last as long as I do?<\/p>\n The reality is that the super industry is not doing nearly enough to allow Australians to answer that question with a confident \u2018YES\u2019.<\/p>\n In retirement, two financial risks dominate the minds of retirees. Longevity risk, the risk they will outlive their savings; and sequencing risk, where market downturns early in retirement<\/a> can permanently reduce how long their savings last.<\/p>\n When retirees don\u2019t feel those risks are being actively managed, predictable behaviour follows: they underspend \u2018just in case\u2019, hold unnecessary cash buffers, and carry anxiety for years.<\/p>\n These fears are backed by research, which indicates that only half the Australian population feel financially confident<\/a> about their retirement, and it\u2019s lower for some groups, including women.<\/p>\n That\u2019s why there is a degree of irony in ASFA\u2019s release landing in the same week as the Federal Government\u2019s Best Practice Principles for Superannuation Retirement Income Solutions.<\/p>\n The principles go to the heart of the purpose of super: not simply accumulating savings, but the conversion of savings into income that people can depend on for life.<\/p>\n The good news is that the blueprint to achieve this already exists. New types of solutions that combine the flexibility people value in account-based pensions with longevity protection can provide a base level of income for life, while still keeping exposure to market growth. They also integrate with the age pension<\/a>, on which many Australians still rely and, importantly, are being supported by new forms of low-cost digital financial advice.<\/p>\n Under illustrative modelling using this kind of approach, a retired couple could target an income around ASFA\u2019s comfortable level ($77,375 a year) with a starting balance of around $530,000, materially lower than the balance ASFA calculates.<\/p>\n But the critical difference is not just the number: it\u2019s the confidence that an income stream will continue, regardless of how long they live.<\/p>\n These structures also reduce the need for large precautionary cash buffers, provide stability through market cycles, and help manage sequencing risk to support long-term strategies rather than reactive decision-making<\/a>.<\/p>\n The result is financial confidence: confidence to spend, to plan, and to actually enjoy retirement, particularly in the early, active years.<\/p>\n Yet, despite years of urging from Government and regulators, progress in developing lifetime income solutions, together with new forms of digital advice, has been slow.<\/p>\n Super funds should not be surprised that more of their members are voting with their feet and moving savings to alternate investment platforms, or setting up SMSFs<\/a>. Too many still only offer a little more than a traditional account-based pension and limited forms of guidance and advice.<\/p>\n ASFA\u2019s benchmark is a worthy talking point, but if the industry keeps treating retirement as an accumulation contest, we will keep producing retirees who feel compelled to underspend.<\/p>\n The Government\u2019s principles set a clear expectation. Trustees need to stop hiding behind benchmarks and start being judged on the outcome retirees actually require: sustainable income, through good markets and bad, for as long as they live. Anything less is failing the purpose of super.<\/p>\n Get the latest Yahoo Finance news – follow us on Facebook<\/a>, LinkedIn<\/a> and Instagram<\/a>.<\/p>\n AMP group executive, superannuation and investments, Melinda Howes, says a comfortable retirement isn’t just a number but an income that goes the distance. (Source: Supplied\/Getty) <\/p>\n
Retirement success isn’t just about hitting a certain balance. (Source: Getty) <\/p>\n