The latest Vanguard study into the retirement experience of Australians has shown individuals who include personal and household data in income strategies during this stage of life, rather than focusing purely on a minimum withdrawal strategy, will significantly improve their outcomes, particularly if they have complex financial circumstances.
Specifically, the analysis found an increase in projected annual retirement incomes of between 3 per cent and 51 per cent can be enjoyed if Australians take their personal and household information into account when formulating a strategy for this stage of their lives rather than just relying on forecast minimum drawdowns.
The research compared three different approaches to formulating a retirement income strategy: one based on the concept of minimum withdrawals, one where a hypothetical super fund assists with determining a strategy from limited member information and one that includes comprehensive and individual household information.
According to Vanguard, the results reflect how valuable personalised financial advice can be for retirees as they will have all of the relevant information regarding their own situation, but may lack the financial wisdom to bring it all together to formulate an effective retirement income strategy – a dimension an adviser can add.
“The study shows that the more personal and household information incorporated into a retirement income strategy, the greater the potential financial benefits. This underscores the critical role personalised financial advice plays in improving retirement outcomes, particularly as financial complexity increases,” Vanguard Australia head of financial adviser services Rachel White noted.
“Comprehensive personalised advice, which combines financial acumen with a person’s full financial picture, is undoubtedly the gold standard. Unfortunately, the cost of comprehensive personalised advice and a shortage of advisers make it hard for people to access this level of advice.
“The benefits of a more personalised approach are clear from a financial standpoint, but the emotional and behavioural benefits that come from having a personalised plan, and the confidence that brings, are also important.”
