How to avoid your super running out

Having a solid retirement wealth nest egg before you retire is a big goal that many strive for.

With the current life expectancy in Australia sitting at 83.5 years of age, if you retire at 65 you need your super to last you for nearly 20 years.

But what happens if you are burning through your super quicker than expected?

Jennifer Langton, Specialist Advice Manager for Aware Super, explains that the next generation of people to enter retirement have had the full benefit of superannuation, but for older generations, the system came into effect later in their life.

Backup

She says that people should be reassured that the age pension is always a backup for all older people if they do run out of their super.

“This next generation really has had the benefit of superannuation for their whole working life. The older generation now in their 70s and 80s didn’t have that,” explains Ms Langton.

“We do find that clients run out of money but we are lucky enough that we have the age pension, that is always the safety net. It won’t provide a luxurious lifestyle, but nobody should be living in poverty Ms Langton explains.

“This is where structuring your situation earlier in life and making sure you have had advice on investing appropriately, and maybe considering different options other than super to supplement things to make it easier for you to manage in the long term.” It’s best to avoid running out of your super. Here are some tips to help you stretch your funds as far into retirement as possible:

◆ If you own a home, it would likely hold many memories and might be hard to part with. However, it is one of your biggest assets. If you find that you are going through your superannuation quicker than expected, downsizing to a smaller home and selling your current house can provide extra funding for yourself.

◆ Don’t forget, your home is also an asset that can provide income and capital in later life by releasing equity via the Government Pension Loans Scheme or a Reverse Mortgage from a bank.

◆ Start budgeting. While people may not be a fan of the technique, if you are drawing your super quicker than you expected, it may be a good idea to rein in your spending and map out your necessities for a while.

◆ Utilise other Government benefits and entitlements. Some easy ways to cut costs is through using available resources for older people, this could include supplements for energy, utilities and travel, or special seniors meal deals. Your local council and community groups also provide a range of subsidised services for older Australians. ◆ Keep on top of fees. You may not realise it, but your super organisation does charge fees to your account. Reassess your super account every now and then to see if it is fiscally still the best decision for you, or whether you should change to a different super organisation that has lower fees.

◆ Diversify your investment portfolio so there are multiple options for income over time. For instance, lifetime annuities and deferred annuities are investments that can be put in place to provide later life income.

◆ It’s never too late to pick up a part-time job. If you are fit and have spare time, a part-time job can take the burn off of your super.

Get advice

It is really important to get advice from a certified financial planner and reassess your situation regularly.

“I will often pick up a client who has not had advice for years and years, and they are drawing so much from their superannuation that they are actually running down their super too quickly. In some circumstances, they are drawing so much from their superannuation that it is actually reducing their age pension entitlement,” Ms Langton says.