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Why Are Retirees Dying Wealthier Than When They Retired?

Fresh research has revealed Australians are dying wealthier than when they retired, withdrawing only the government-mandated minimum amount from their super to live on.

Earlier this week ABC News reported CSIRO behavioural economist Dr Andrew Reeson’s research, which showed most people are taking a conservative approach to spending their savings.

“The vast majority of people don’t spend their superannuation recklessly, and if anything perhaps a little bit the opposite,” Dr Reeson said.

“People are very risk averse and spend at a relatively slow rate, which potentially means that many people will die still with significant superannuation balances.”

The results of the study are based on previously unpublished data from the Australian Tax Office and super funds dating back to 2004.

Under current laws, each year retirees must withdraw the minimum amount from their super to continue to quality for the tax exemption of super investment earnings.

The minimum payment for those in the 65-74 age bracket is five per cent of the pension’s account balance.

Dr Reeson said he believes some retirees may be using those small rates as their default because of the difficulty and complexity of making financial decisions about an uncertain future.

“It’s certainly not uncommon to see superannuation accounts where they’re actually growing more quickly than people are spending them,” Dr Reeson said.

Some cases have revealed that, especially when people die relatively early into retirement, they are passing with more money than when they initially retired.

It’s been more than 20 years since the introduction of compulsory superannuation and Dr Reeson said awareness surrounding retirement spending plans needs to increase.

“Much of the current debate is around increasing saving levels, and for good reason, but providing more support for people as they approach retirement into thinking about what they’ll need and how they’ll use their pensions and what other investments they can make,” he said.

“This is money that people have earned and saved, and one would hope that they can enjoy it, rather than having a situation where they die without actually spending it.”

Dr Reeson said he hoped his work would spark debate regarding investment products like annuities, which could provide guaranteed lifetime income.

Did you have a spending plan in place when you retired, or will you when you retire?


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Alana Lowes

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