Super Informed Radio episode #2: Retirement expectations vs. reality
|Disclaimer: What you're about to read is of a general nature and doesn't take into account your personal financial situation, needs or objectives. We recommend you seek financial advice before making any decisions about your super and consider the relevant UniSuper product disclosure statement.
Lyndon: Well, hello there, and welcome to Super Informed Radio, our UniSuper podcast. My name is Lyndon.
Marta: I'm Marta.
Rob: And I'm Rob. This is our monthly podcast, a podcast that breaks down the complex world of super in an entertaining way. Marta, what have we got in store for our listeners today?
Marta: Well, a lot of the stuff that we've been hearing from our member services guys and advice guys is people worrying about whether they're gonna be retirement ready. So this month, we're exploring a topic of retirement expectation versus reality. So we take it to the streets, asking people about their attitude towards super and whether they think they're gonna be retirement ready, basically just gauging whether they're interested in super. And then we speak to Julia Maciver, who's an Assistant Product Manager here at UniSuper, about the more technical side of what's in she's come across in her work, and offering some suggestions and things that people can do to be ready for retirement.
Lyndon: Brilliant. Shall we take it away?
Marta: Let's do it.
Rob: Have you given much thought to your superannuation?
Woman 1: I worry about it because I don't know where it is.
Man 1: I'm not really that well informed about it, but, yeah, I hope so.
Rob: Have you made any inroads into trying to sort of find out, locate where it might be?
Woman 2: No, not yet. But I know that that's something I can do online, find my super. But I haven't done it yet.
Rob: When do you think you might?
Woman 2: Maybe today. Maybe soon. I think. Yeah.
Rob: Do you think you'll have enough money in your superannuation to live off when you retire?
Woman 3: I hope so.
Man 2: I would hope so. I believe I do, but I don't really know much about what's going on with how much money I have. I'm just not really planning. I'm just doing it. Yeah. Earning money.
Woman 4: Just in changing jobs and changing industry, it's hard to kinda keep track of.
Marta: If you could tell, like, anyone in the younger generation one thing about the super, what would it be?
Woman 5: That it's there to make sure you have enough money at your retirement.
Woman 6: Don't be such a spend freak when you're younger. You've gotta put away for your future. Because if you don't, you just aren't going to have enough money.
Marta: What would be your first point of call if you were to look more info about your super?
Woman 7: I'd Google, I guess.
Woman 8: The website? Yep. Just Google it.
Man 3: Just the super fund that I'm in, which is being put forward by my work, but, yeah, I'd just go there I suppose. But I haven't really looked into it myself much.
Man 4: Probably online or contacting the super company directly.
Woman 9: My husband, usually, and our financial adviser. Yeah.
Rob: When did you decide to see a financial adviser? Was it early on in your career or sort of towards your retirement?
Woman 9: Probably in our 40s we started to see a financial adviser.
Rob: And what prompted that?
Woman 9: Well, you have to think about your future. Don't you? Your retirement. So that's why we... If you don't start early, well, you're behind. Yeah.
Rob: And is superannuation a big part of your retirement? Has it been...
Woman 9: Huge. Yes. Yeah. You have to have a good retirement plan.
Rob: Do you think you'll make changes to your superannuation, make more contributions to it anytime soon, or what do you think you might do?
Woman 10: I think I'll consolidate my super and I'll go from there. I guess that number will give me, maybe a bit of a kick. I think I'll keep track of it and try to use the same super fund every time I kinda make a payment.
Marta: Would you consider super to be one of your important priorities at the moment or...?
Woman 11: Not at all.
Rob: And why is that?
Woman 10: Because I'm 23. I've got a lot of time to worry about that stuff.
Man 5: Probably later in life. I have few different super accounts. I think I need to merge them into one. So it's something I need to look at in the future, definitely.
Marta: Yes, that was really interesting. We found that there's a bit of an even split there with people who are totally not interested in their super, they know that it's important but are just too overwhelmed with other stuff, versus people who are confident and ready to go. It was so fascinating.
Lyndon: I think it's worthwhile pointing out, Marta, that we were accosting people doing their Christmas shopping.
Lyndon: Probably, super wasn't, perhaps, front of mind but that's all good. Some interesting opinions out there.
Rob: Well, the retirement dream has generally been one of constant holidays, sunshine, mortgage paid off, putting your feet up, basically, a stress-free life. Well, this might still be the dream. They reality of retirement, for some, might be something completely different. The media often spin negative news stories about how we may not have enough to retire on. Well, Julia Maciver, assistant product manager at UniSuper, has come to allay any fears we might have. Julia, welcome to Super Informed Radio.
Julia: Thanks for having me.
Rob: Julia, what are people's expectations, generally, when it comes to retirement? Do people believe they actually will have enough to retire on?
Julia: Generally, people do. Generally, we all hope that we're gonna be able to retire when we want to with all the money in the bank and live up the dream. Go traveling; spend time with the kids, all that kind of thing. But it doesn't often work out like that for some people, unfortunately.
Lyndon: What are some of the main reasons, do you think, it doesn't work out with people?
Julia: Generally, it's because they're forced to leave work before they plan to, either through redundancy or illness or injury, either to themselves or family member if they have to stop work to care for them full time. So if you... Generally, we don't start thinking about retirement until we're in our 40s, 50s. So if you missed that last 10 years of working, then it can have a quite large impact on your retirement.
Lyndon: Does that come as a surprise to people?
Julia: Yeah, I think it comes as a shock to a lot of people. So pretty much all of us don’t like thinking that bad things are gonna happen to us, but bad things do happen to good people, unfortunately. So I've had family members who'd been forced to...well, not forced, but have taken their redundancy in their 50s or 60s. And they've really struggled to find even part time work after that. That can be a real challenge.
Lyndon: So, Julia, I've gotta ask. More and more kids are leaving home later in life. Is that adding to the financial strain of people upon retirement not having enough to actually live off? Is it the children?
Julia: It's not just the children, but the children probably factor into that. There's lots of things, like people are buying homes later. They're having to borrow a lot more money to do it, so it's taking us longer to pay off the mortgage. Education is expensive for the kids these days. So we've got a lot of priorities that, you know, super and retirement often falls to the bottom. If you've got a tight budget, it's hard to find a bit of extra money to save for retirement.
Marta: Do you find that those people who have a bit of a gap in what they expect to be able to spend their money on and what actually becomes a reality once they do retire?
Julia: Absolutely. We find that a lot of people actually don't know how much money they're gonna need in retirement, and haven't really thought about how long retirement's gonna last. So these days, you can be retired for anywhere from 25 to 40 years if you live to be 100. So that's nearly as long as your working life. It's a long time to make your money stretch. So, yeah, one of the best things people can do is think about what kind of lifestyle they want when they're retired. Do they wanna be able to travel? Do they wanna help out with the expenses of the kids? Are you still gonna have a mortgage to pay off? All that kind of stuff.
Rob: So just on that, you said the people don't really know how much they're gonna have to live off if they're to take their super as an income stream, for example. So how important is planning for retirement?
Julia: So important. It's important to have a plan A and a plan B for if things don't go so well. So a lot of people, even the best thing they could do in their 20s is figure out how much money they wanna spend and then go, reverse engineer that into how much money they're gonna need to live off. So it's much easier to save if you start early but there's all these competing pressures, it's really hard to do.
Lyndon: It just seems like the message is even if you are listening to this podcast and in your 20s or 30s, now is the time.
Julia: Now is the time.
Marta: Oh gosh.
Julia: I don't want to get into the whole smashed avo debacle, but it is true, if you can find an extra 10 or 20 bucks a month, that can really add up over a long time. Because you've got 30, 60 years, your money's still invested when you're retired, you're still earning money off that. So, yeah anything you can put aside now will really help.
Marta: I've heard a term bandied around a little bit recently, it's called the retirement smile. And it's, like, to do with money and how people think about what they're gonna spend on in retirement. What do you know about that?
Julia: Yes. So, it's a thing that's sort of floated around for a while now. A lot of people think that when they retire, they're gonna need a bit of extra money to go traveling, buy the flashy new car, whatever. And then after that, their income needs are sort of gonna trail off as they get a bit older and a bit frailer. What we find actually happens for a lot of people is that the smile shape. You start off with quite high spending needs when you go traveling. And then as you sort of slow down a bit... You're spending this money, and then as you get towards sort of 75, 80 years old, your costs start to go up again. It's your healthcare costs and maybe age care costs come to it. So we find that people often don't think about that later spending. They don't really budget for it. That can be quite problematic if you need to find $300,000 to go into an age care home. You really need to plan for that.
Lyndon: So instead of, like, a downward sort of graph, if you like. You start at the top and you go down. It is that smile thing, where it goes down, but then it comes back up at the end.
Julia: Yeah. It can for some people.
Lyndon: Yeah. Right.
Marta: So, Julia, you were saying in that smile, you know, you've got this sort of spike in spending, and then it dips and then it spikes again, sometimes unexpectedly for people. If people are in a way, are there ways that people can maybe supplement or give their income at that stage a bit of a boost?
Julia: Yeah, absolutely. I mean, a lot of people have savings outside of super as well that they can draw on. But also, there's the age pension that's always there as a fall back.
Rob: So, going back to the planning. If people do want to sort of look at ways that they can start to put some sort of budget together, but don't really wanna use an Excel spreadsheet... Because no one really likes Excel. How can people sort of go about doing some self-sort of planning, before they sort of take the more serious road of, perhaps, speaking to an adviser?
Julia: There's a couple of apps that are quite useful for this, like, ASIC’s got a MoneySmart one, I think it is, that just lets you track your spending. So you just put in how much money you spend on stuff and that gives you quite a scary idea of how much money you spend. I didn't realise I spent $3,000 a year for coffee, for example, but I used to.
Julia: Yeah. So just keeping track of what you're spending. And then we've got a really good budget planner tool on our website that you can go on. And that will give you an idea about what some of your spending in retirement might be.
Lyndon: And in terms of that next step, would that be something like considering seeing an adviser going and chatting to one of our on-campus consultants or something like that?
Julia: Yeah, absolutely. On-campus, consultants are a really great first point of contact. If you really haven't thought about this now, it's great to just go and talk to someone about it. And then we do have really great advisers through UniSuper Advice. So we've got over-the-phone advice if you just want a more informal thing, or a face-to-face advice if you want the full blown financial "what do I do with my life?"
The other thing that you can really do to help is to review your insurance so you can get really great deals of insurance through super because we buy in bulk, basically. So it's a good idea to log on to MemberOnline and see what your insurance cover is. And we've got an insurance needs calculator on our website as well to see if you've got enough money there to pay off the mortgage or something should happen to you.
Lyndon: So you mentioned that we might need to plan for a longer retirement. That sort of feeds into like a longer life expectancy. Does that also mean we'll be working longer as well?
Julia: It is really hard to tell. The Australian Bureau of Satistics did some surveys on this kind of thing, and they found the people are intending to work later just because they've got 30 years’ worth to pay for and they don't have the money yet. So, yeah. It looks like people are thinking about working longer.
Rob: Well, Julia, you've definitely given us some food for thought. Thank you very much. Planning and possibly seeking advice is definitely some wise options that people should consider. So thank you very much for coming in to speak to us today.
Julia: No problem. Thanks for having me.
Marta: So that brings us to the end of the second episode of Super Informed Radio. We made it.
Lyndon: We did. And if you have any questions or would like any more information about anything you've heard on the podcast today, send us an email to email@example.com. Or Rob, what number can the listeners call?
Rob: They can call 1800 331 685.
Lyndon: Thanks for listening and we'll see you next time.