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Speaker 1: Welcome to Fear and Greed Q and A where we

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Speaker 1: ask and answer questions about business, investing, economics, politics and more.

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Speaker 1: I'm Sean Aylmer. Millions of Australians are approaching retirement and

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Speaker 1: as they do, their priorities around investing and superannuation change.

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Speaker 1: There's a lot of myths and misconceptions and unfortunately a

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Speaker 1: lot of mistakes are made as well. So today I

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Speaker 1: wanted to look at the top five mistakes made by

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Speaker 1: retirees or those approaching retirement and how they can be prevented.

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Speaker 1: Derek Gascoyne is a certified financial planner and the State

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Speaker 1: Manager Advice at Unisuper, a terrific supporter of this podcast. Derek,

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Speaker 1: Welcome to Fear and Greed.

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Speaker 2: Thank you Sawan, thanks for having me close to.

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Speaker 1: My own heart this particular segment, Derek, myth number one,

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Speaker 1: or maybe it's not a myth, we'll find out aspiring

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Speaker 1: retirees subscribing to a world trouble myth that you can't

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Speaker 1: retire without X million dollars in suber Is it true

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Speaker 1: or not?

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Speaker 2: Well, it's going to be true for some, but it's

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Speaker 2: not true for everybody. And the classic number is always

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Speaker 2: a million dollars in super like everyone needs a million dollars,

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Speaker 2: But that's it's definitely not true for the mass. So

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Speaker 2: I'd probably say this that, you know, I think how

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Speaker 2: much you need and retire is going to largely be

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Speaker 2: defined by what your needs are going to be. So

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Speaker 2: you know, if you have a few hundred thousand dollars,

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Speaker 2: it's probably going to define what your needs are. However,

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Speaker 2: if you have needs which require a substance, much more

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Speaker 2: substantial amount of capital to kick off retirement with, and

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Speaker 2: obviously that's going to dictate what that number is. So

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Speaker 2: this is different for everybody. You know. I have some

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Speaker 2: very very well healed clients with you know, worth a

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Speaker 2: lot of numbers, you know, well into the seven digits,

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Speaker 2: but their cost of living is only about thirty thirty

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Speaker 2: five thousand dollars a year, so you know, they don't

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Speaker 2: need a million or two million or three million to retire.

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Speaker 2: They probably only needed a few hundred thousand. There is

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Speaker 2: some numbers that the Association of super Fund Australia bounce

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Speaker 2: around in terms of how much one needs to support

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Speaker 2: a comfortable lifestyle, which they define at around seventy three

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Speaker 2: thousand dollars a year for a couple and around fifty

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Speaker 2: two thousand dollars a year for a single. And if

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Speaker 2: you're a homeowner, they basically say, if you want to

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Speaker 2: support that, you need around six hundred and ninety thousand

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Speaker 2: of lump sum at the point of retirement to support

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Speaker 2: that for a couple and around six hundred thousand for

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Speaker 2: a single. So a far cry from the million dollar

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Speaker 2: figure and far cry from even bigger numbers that people

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Speaker 2: are reporting. Like I said, it's really all tied to

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Speaker 2: your needs, and as long as your needs are relative

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Speaker 2: to your means, then I think everyone should be able

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Speaker 2: for to retire.

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Speaker 1: Okay, misconception number two potentially or not about the age

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Speaker 1: pension and applying for it as soon as eligible. When

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Speaker 1: are people eligible for the age pension? And should you

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Speaker 1: jump in as soon as you are eligible?

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Speaker 2: Well, absolutely, I do think you should apply as soon

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Speaker 2: as one becomes eligible. I think the trick for most

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Speaker 2: people who is knowing when that is so the first

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Speaker 2: thing is you've got to be eligible first by age,

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Speaker 2: which for the major already of people who is going

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Speaker 2: to be from about sixty seven onwards, So that basically

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Speaker 2: is for anyone born after around January nineteen fifty seven.

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Speaker 2: They've got to be sixty seven before they can put

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Speaker 2: their hand up. But just because what is eligible doesn't

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Speaker 2: necessarily mean they're going to be entitled to something. And

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Speaker 2: I think this is where people get to bit a

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Speaker 2: little bit lost. It is a bit of a dark

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Speaker 2: science social security. So I think people are reluctant often

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Speaker 2: to jump in and ask the question. And of course,

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Speaker 2: you know sense Link being or Department of Human Service

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Speaker 2: has been the sort of custodi into this. They don't

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Speaker 2: go around and tapping people on the shoulders say we

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Speaker 2: think you should put your hand up now for the

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Speaker 2: age pensions. So I think it's really a case of

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Speaker 2: people being happy and comfortable to go and have that

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Speaker 2: conversation with Sentling and sort of say where do I

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Speaker 2: stand in a relation to this? It is complex, It

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Speaker 2: is misunderstood. A lot of people think and look at

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Speaker 2: what they're drawing, for example, from their superannuation to fund

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Speaker 2: their retirement. They think, oh, there's no way I'll get

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Speaker 2: an age pension based upon that, Or they look at

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Speaker 2: their assets and they'll say I think I'm just simply

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Speaker 2: worthway too much. But I think be surprising to a

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Speaker 2: lot of people to know exactly how eligible they might

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Speaker 2: happen to be and what they might be entitled to.

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Speaker 2: And you know, for all the clients have been dealing

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Speaker 2: with over the decades, you know, a lot of them say, look,

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Speaker 2: I'm really keen just to make sure I get even

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Speaker 2: just a few bucks of age pension, which gives them

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Speaker 2: access to the pension, a concession card which probably in itself,

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Speaker 2: with all the concessions and so forth, is worth a

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Speaker 2: good couple of thousand dollars as well. So I think

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Speaker 2: it's really just a case of people being prepared to

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Speaker 2: ask the question, and if they get knocked back, that

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Speaker 2: might give them a very good idea as to when

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Speaker 2: they actually might go and put their hand up. And

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Speaker 2: we know that there are some stats out there to

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Speaker 2: say that people can often wait as long as eighteen

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Speaker 2: months to apply for the age pension from when they

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Speaker 2: become eligible for it. And that's a lot of that's

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Speaker 2: a lot of benefits to say goodbye to because you

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Speaker 2: waited when you probably didn't need to.

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Speaker 1: Okay, so we've had good news so far here, Derek,

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Speaker 1: we've had You don't necessarily need a million dollars. You

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Speaker 1: should apply for the age pensions as since you candle,

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Speaker 1: though eligibility rules to apply obviously. The third myth or

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Speaker 1: otherwise under speed in retirement? Do people underspend in retirement?

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Speaker 1: Is it about trying to save money to leave to

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Speaker 1: your kids? Is it? I mean, my kids are going

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Speaker 1: to have guaranteed super all their working lives, so I

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Speaker 1: feel no particular inclination to leave money to them. Maybe

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Speaker 1: I'm wrong.

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Speaker 2: I look, some people feel like that, you know, that

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Speaker 2: they want to try and preserve what they've built to

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Speaker 2: act as a legacy. And interesting we did some We

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Speaker 2: published a report recently which looked at exactly this question,

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Speaker 2: and only around twelve percent of those asked said that

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Speaker 2: they were preserving or holding back on drawing down in

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Speaker 2: their superannuation in order to create a legacy for the

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Speaker 2: next generation. But for the other eighty eight percent who

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Speaker 2: said that they were holding back on drawing down in

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Speaker 2: their souper, it was largely driven by a fear of

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Speaker 2: running out of money. And you know, there's sort of

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Speaker 2: that rainy day fear. I suppose that they're putting it aside.

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Speaker 2: So's it's definitely something where I think people aren't because

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Speaker 2: they're not clear in terms of what their capacity is

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Speaker 2: to be able to spend in retirement. They're generally more

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Speaker 2: inclined to be more conservative from an expenditure point of view.

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Speaker 2: And again this is not a problem, and again probably

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Speaker 2: a good problem to have for some people. It's not

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Speaker 2: a problem experienced by everyone. But I've typically found again

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Speaker 2: that I think capital adequacy, you know, how much a

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Speaker 2: person can sustainably spend in retirement without sort of fear

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Speaker 2: of running out of money too early is often misunderstood

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Speaker 2: and often underestimated, and a lot of people will again

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Speaker 2: spend less thinking that they were going to sort of,

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Speaker 2: you know, burn their money through a little bit too soon. Now,

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Speaker 2: when I this is often a thing that a lot

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Speaker 2: of the younger retirees tell me. But then when I

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Speaker 2: meet with my much older retirees, the people who are

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Speaker 2: already sort of well through their seventies, for example, a

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Speaker 2: lot of them are saying, geez, I wish that I

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Speaker 2: had never held back on spending when I had the

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Speaker 2: chance to do so. You know, I chose not to spend,

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Speaker 2: but I didn't take that extra holiday that I could have.

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Speaker 2: I didn't upgrade the card to the one I wanted.

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Speaker 2: I went the model down or I didn't actually give

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Speaker 2: or support a child to the extent that I potentially

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Speaker 2: could have. And there's actually now a lot of regrets

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Speaker 2: emerging from that cohort. A lot of them are saying,

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Speaker 2: you know, I wish that I'd better understood my capacity

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Speaker 2: to be able to spend what I could. But now

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Speaker 2: I've got more money, probably than what I started off

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Speaker 2: retirement with, despite the fact I've been drawing down in

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Speaker 2: the process. But what I don't have anymore is actually

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Speaker 2: the time left in which to be able to enjoy it.

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Speaker 2: And our message to people is to really sort of

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Speaker 2: get as informed as possible in terms of what sort

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Speaker 2: of income they could reasonably expect to achieve and sustain

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Speaker 2: in retirement, and that gives them much greater clarity in

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Speaker 2: terms of what their ability is to sort of spend

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Speaker 2: their capital.

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Speaker 1: Right, that's really fascinating. I'd never thought of that myth

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Speaker 1: or otherwise misconception number four, failing to plan for their

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Speaker 1: non financial elements of retirement. I suppose that works into

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Speaker 1: the previous what you were saying. Then when I read

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Speaker 1: about retirement, I kind of get the idea of spending

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Speaker 1: up early. But health that's always a big one, are

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Speaker 1: they going to be big health costs when you're in

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Speaker 1: your seventies or eighties or nineties that you need to

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Speaker 1: put money aside for.

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Speaker 2: Yeah, you definitely do. We know age care in particular

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Speaker 2: is not a cheap exercise in Australia. Whilst it's heavily

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Speaker 2: subsidized by the government, it might not necessarily be to

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Speaker 2: the same extent for much longer. But yes, you're right.

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Speaker 2: I mean, I think in our sort of more active

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Speaker 2: care three years, you know, we should look at spending

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Speaker 2: a little bit more, but not to the extent that

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Speaker 2: we're also spending a little bit too much of tomorrow's

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Speaker 2: money today either, and that we leave a little bit

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Speaker 2: there to provide for again the unexpected as well. You know.

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Speaker 2: The failing to plan for the non financial elements of

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Speaker 2: retirement also feeds into It's not a financial thing strictly.

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Speaker 2: Is more about people saying I've worked for forty, sometimes

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Speaker 2: fifty even longer years. I've had structure, I've had routine.

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Speaker 2: You know, I've had a paycheck come in every fortnight

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Speaker 2: without fail. How am I going to go transitioning to

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Speaker 2: a completely different world where that structure and routine and

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Speaker 2: have it is completely removed from my day to day.

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Speaker 2: And you know, the successful retirements that I've seen are

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Speaker 2: the ones where consideration to this has been given a

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Speaker 2: lot early in the process, sometimes years before they actually retire.

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Speaker 2: So people, you know, go from working and going a

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Speaker 2: million miles an hour and then boom they stop and

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Speaker 2: they enter retirement and suddenly they don't know how to

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Speaker 2: deal or cope with that loss of routine and structure

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Speaker 2: to their lives as well. So I think those who

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Speaker 2: do this really well think about that a lot. It

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Speaker 2: can be very psychologically impactful, particularly when all your identity

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Speaker 2: and a lot of your self worth is tied up

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Speaker 2: in your occupation and your title and your job. To

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Speaker 2: have all that sort of disappearing in some cases overnight,

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Speaker 2: I think can be can be quite jarring for a

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Speaker 2: lot of people as well. So we're very again big

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Speaker 2: on sort of saying to people, where you have the

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Speaker 2: chance to be able to do so, try and practice

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Speaker 2: retirement as much as possible. And there's things like transition

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Speaker 2: to retirement, there's going from full time gradually cascading your

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Speaker 2: way through part time work, and obviously you know, flexible

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Speaker 2: and hybrid ways of working are really enabling people to

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Speaker 2: sort of try on what it's like to not necessarily

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Speaker 2: go into the office every day as well.

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Speaker 1: Okay, number five, and I mean this isn't a myth,

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Speaker 1: but it's about financial advice, right, and the need for

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Speaker 1: financial advice. It's easy to say when it needs financial advice,

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Speaker 1: and I totally believe that. You know, whether you're twenty

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Speaker 1: or whether you're eighty, you need financial advice. But the cost,

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Speaker 1: there's always a cost involved in that. So what is

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Speaker 1: the trade off there and how much how important is

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Speaker 1: financial advice and how much not so much? How much

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Speaker 1: would you be spending? But you know, how do you

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Speaker 1: weigh that against the cost?

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Speaker 2: Well, look, not all forms of advice cost. And you

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Speaker 2: think some people when it comes to advice, there's general advice,

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Speaker 2: which is often delivered at no extra cost to people,

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Speaker 2: either by their super fund or by by some other provider.

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Speaker 2: But when it comes to personal advice, there is often

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Speaker 2: a cost to that. I guess you know. The reply

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Speaker 2: to that is what's the cost of not getting advice?

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Speaker 2: You know, and I've already mentioned around the age pension.

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Speaker 2: If getting advice and it costing, you know, dollars X

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Speaker 2: actually can repay itself many times over in the form

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Speaker 2: of attracting greater benefits or enhancing your age pension, or

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Speaker 2: reducing your your tax liabilities, all those types of things

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Speaker 2: that I think, you know, advice will more often than

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Speaker 2: not very much pay for itself. And I think, you know,

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Speaker 2: we talk about retirees, you know, making the mistake of

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Speaker 2: not getting advice, I think it's really about not seeking

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Speaker 2: that clarity that advice can provide. You know, advice can

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Speaker 2: really shine a light on, you know, some of the

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Speaker 2: things that I've already mentioned, how much you need when

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Speaker 2: can you retire? And that can save people from having

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Speaker 2: working in jobs that they potentially don't want to work

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Speaker 2: another second for if they can help it, and if

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Speaker 2: they can afford to retire and take that opportunity and

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Speaker 2: that be proved to them using hard crunch numbers, then

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Speaker 2: I think they'll generally take that. We know that you know,

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Speaker 2: of the eighty percent of pre retirees who have taken

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Speaker 2: advice and guidance that might necessarily be paid advice, they're

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Speaker 2: far more confident and clear about when they can retire,

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Speaker 2: but not only when, but also if and how they

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Speaker 2: can retire as well. So retirement's already a big enough

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Speaker 2: transition as it is, you know, but to actually have

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Speaker 2: that clarity that advice can so often provide is so powerful.

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Speaker 2: And I've had a lot of people say to me

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Speaker 2: over the time when we've sat down and we've done

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Speaker 2: a plan, we've crunched the numbers, and we've told them, hey,

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Speaker 2: you know you're all good. You can go into your

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Speaker 2: boss's office on Monday morning and you can hand that

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Speaker 2: letter of resignation because we've been ruthless in our assessment

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Speaker 2: and we know that you can afford to retire, no

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Speaker 2: problem at all. And we've charged for that work, but

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Speaker 2: a lot of people said they would have paid many

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Speaker 2: more time times that, just for that reassurance and peace

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Speaker 2: of mind that they can actually achieve everything they want

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Speaker 2: to achieve and walk away from that job and walk

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Speaker 2: into perhaps a completely another career, or just retire full stop,

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Speaker 2: pick up a golf club and work on their handicap,

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Speaker 2: which is which is my plan one day.

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Speaker 1: Shan absolutely, Derek, thank you for talking to Fear and Greed.

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Speaker 2: You're welcome. Thank you.

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Speaker 1: It was Derek Gascoyne, State Manager Advice at the UNI

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Speaker 1: super a great supporter of this podcast. I'm Sean Almer,

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Speaker 1: and this is fear and greed, Q and DA