The director of a financial services firm has endorsed a key finding of the Retirement Income Review (RIR) that improved understanding and knowledge of three main elements and the parts they play together in the current framework will improve individuals’ management of their capital in the decumulation phase of their lives.
Specifically, the three areas identified by the RIR that Australians need to be better educated about to allow them to feel comfortable in formulating a prudent strategy to draw down on their capital in retirement are the family home as a source of retirement income, aged-care costs and the age pension.
According to Allianz Retire + director Sally Evans, an initiative to better inform people about the abovementioned elements will help mitigate emotional factors such as fear when individuals decide whether to draw on their capital to provide a retirement income.
“People don’t know how long they will live, how long they will work or what their health status will be. Those uncertainties play out in fear and a lack of confidence. That creates an enormous challenge for people to overcome,” Evans said during a recent industry webinar.
Allianz Retire + head of distribution Catriona Wortley reinforced the point, revealing the organisation’s research indicated certainty is what retirees desire.
“Our research found 61 per cent of Australians fear running out of money more than they fear death. Our industry needs to lower that number and help retirees feel more confident about the value of their investments,” Wortley said.
RIR panellist Deborah Ralston suggested the situation could be improved if the education regarding retirement income was commenced in the years leading up to retirement.
“It’s important to get people to think about themselves as they come into retirement. What kind of income am I going to have? What can I do [about it]?” Ralston said.