Retirement and superannuation: questions not being asked

Running out of money and paying too much tax are two of the biggest dangers threatening retirees. Here’s how to prevent them.

It’s unwise to prepare for retirement without knowledge or vision. Picture: iStock

Half of Australians are heading towards retirement without ever seeking advice or information about what they need to do financially, a new study suggests.

Research by the Association of Superannuation Funds of Australia (ASFA) has found that just 51 per cent of people have consulted at least once source of information – including financial advisers, super funds, friends and family, online calculators and social media.

Among people aged 65-plus, only 60 per cent have ever consulted retirement information sources, it found.

This puts a large chunk of the population in danger of paying unnecessary tax in retirement or potentially running out of money.

ASFA CEO Mary Delahunty said the lack of engagement meant “many Australians may end up worse off than they should be in their post-working lives”.

“I suspect that there are a lot of Australians who don’t think they have enough money for advice to make a difference,” she said.

“That may be an intentional choice or it might be a feeling of shame that they don’t want to engage in these conversations, but we know that even if you have only got a little bit of money, you will do better with that money if someone has helped you organise it.”

ASFA CEO Mary Delahunty says everyone deserves access to help. Picture: Aran Anderson

People with $100,000-$150,000 in super can structure their finances to receive more than $100 per week on top of pension payments without eating too much into their super balance. Proposed government reforms, to enable super funds to provide advice, aim to assist this demographic.

ASFA’s research, spanning 1500 people, found only 21 per cent had sought retirement planning help from financial advisers, and 21 per cent from friends and family. Only 15 per cent used online resources, 12 per cent super fund advisers, 8 per cent media articles and 6 per cent social media.

Ms Delahunty said the outcome of failing to get retirement help “is that your money won’t last as long”.

CreationWealth senior financial adviser Andrew Zbik said “barbecues are the number one culprit” in prompting people to shy away from superannuation.

“Everyone has a horror story back from 2008 and the global financial crisis,” he said.

Mr Zbik said he had seen many costly errors from people who never sought retirement advice, including:

● Retirees withdrawing all their super and putting the money into low-growth, taxable term deposits.

● Not using concessional super contributions that “actually reduce your tax”.

● Withdrawing money from a home loan to invest and not realising this was non-deductible debt.

“There is the misconception that property is safe to invest in, shares are safe and cash is safe, but you are going to lose your money with super. It’s the confusion of an asset class with a tax structure.”

Mr Zbik said people who failed to get information about super strategies would “probably end up paying too much tax”.

“Superannuation is an international tax haven in your own backyard,” he said. “You don’t have to go to Switzerland – there’s $1.9m you can have in super tax-free in Australia and you have full control over where you invest your money.”

Ms Delahunty said many people with smaller super balances were among the hardest workers, such as carers, or older retirees who never received a full career of super.

“It’s a challenge for us as a sector to make sure that we are engaging in such a way that doesn’t isolate people who through no fault of their own haven’t had the full benefit of super,” she said.

“It’s not about the amount of money you have, it’s that everyone deserves access to some help.”

Originally published as Retirement and superannuation: questions not being asked