The retirees using super to create family memories instead of leaving a big inheritance for the kids
Some retirees are hoarding big super balances that get left to their kids. But others are splashing out on holidays for the family to leave lasting memories instead of a big inheritance cheque.
Pat Abbott doesn’t let much worry her. The retired schoolteacher didn’t flinch when markets recently crumbled, driving a sledgehammer through the nation’s superannuation balances.
But there is one thing that gets her blood boiling.
“There’s one thing that makes me cross and that’s all these newspaper articles that say kids are getting cross about parents spending the inheritances,” Abbott says. “No, we’re not spending your inheritance. I am spending my money. And my kids will say to me, mum spend the money. I’m spending the money that I set up for myself in retirement.”
Rather than penny-pinch and leave the kids with a lump sum, she’s splashing out on overseas holidays. Except, it’s not just for Abbott. She’s paying for all of her three sons and her grandkids.
“Last year I went to Bali with one son for two weeks with his family. This year I’m going to Europe with another son,” Abbott says, adding her third son is still finalising where he wants to go.
That offshore adventure is likely next year.
“Instead of giving them money to inherit when I die, I’d like to have a really nice holiday with just their family.”
Abbott sets a limit, and any spending that goes beyond this is shouldered by her sons.
Previously, Abbott had taken the entire family to Dunsborough, a coastal town about three hours south of Perth. But at a regular meeting with her financial adviser she decided she wanted to take things up a notch.
Abbott is part of a growing number of retirees who want to enjoy experiences now and create memories that last a lifetime for her kids and grandkids.
“They (her sons) were thrilled that we could do it,” Abbott says. “They agreed that it was a nice idea rather than going on a big holiday when I wasn’t here. I’ve had a couple of friends who’ve put some money towards a holiday (for their family).”
Abbott, who received no inheritance from her parents, has worked hard to get herself into a position where she’s feeling comfortable in retirement. The sudden death of her husband when she was just 58 left her with debts.
Abbott sought financial advice, sold an investment property and used the benefits of salary sacrificing to improve her position. She retired when she was 69, investing in an annuity to give her guaranteed income each year.
Yet, for many Australians the idea of dipping into their retirement funds to subsidise holidays for their families is something they feel they can’t afford. But experts argue many people probably can afford to spend more on themselves but are fearful they will run out of money.
Challenger chief executive, customer, Mandy Mannix says when people feel uncertain about their finances they cut spending, but in effect they are hoarding super that transfers to the next generation.
“We know retirement can be one of the most rewarding stages of life, but confidence is key,” Mannix says. “When people feel uncertain about their finances, they tend to hold back. That’s led to a chronic underspending problem in retirement, with many Australians living more cautiously than they need to.”
It is one of the factors affecting the happiness of retirees.
A recent Challenger survey of 1633 Australians aged over 60 found the key drivers for retirement happiness are activities, mental health and wellbeing and a sense of purpose.
Those retired are happier than those nearing retirement. Inflation has more people worrying, with 76 per cent of pre-retirees saying cost-of-living pressures have affected confidence that they will have enough money to last in retirement, up from 70 per cent last year.
About 34 per cent of women are extremely worried or very worried about outliving their savings compared to 20 per cent of men, while unadvised Australians are twice as likely to be extremely or very worried about outliving retirement savings.
“Two out of five, so more than two million Australians aged over 60, are saying that running out of money in retirement is one of the top concerns, so if you are worried about running out then naturally I think you don’t spend.”
So how does Abbott get comfortable spending on big overseas trips? When she takes her son’s family to Italy later this year, she’ll leave them and take an organised tour on her own to Denmark, Norway and Sweden.
She says a regular income stream from her annuity and the pension help her plan.
And while the overseas holidays may seem lavish, Abbott keeps most of her life simple.
“Give me a book, give me my garden, my friends, my family, the ability to travel if I want to. That’s all I need,” she says.
For anyone nearing retirement, Abbott suggests that as soon as they turn 60 (and still working) to consider a transition to retirement fund and to salary sacrifice as much as they can.
Abbott, who has been retired for six years, says some people can be put off by the cost of a financial adviser, but she says for her it has been more than worth it.
She says to read up as much as you can to put ideas to your adviser or challenge the advice.
“When I came to retire, I was well set up.”
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