The impending MySuper reforms appear simple on the surface, but it will take quality, professional advice to manage them properly. One wrong decision can result in a loss of income and severely affect the quality of life during retirement.
Australia (PRWEB) August 16, 2012
Australia’s Superannuation Guarantee system was designed to adjust to increased longevity and the demographics shift that it is causing. Many Australians, though, find the system to be complicated, and have trouble navigating it once they actually retire. Due to its “three pillars” approach, many people feel that, once they retire, they are “on their own,” with no idea whether their pensions, annuities, and savings will be enough to provide them a comfortable retirement.
Due to current medical advancement, males can expect to live until the age of 84. Female life expectancy is slightly over 86 years. This means that the average person will have to plan for a minimum of twenty years over the age of 65, and some will live as many as thirty years past retirement.
A recent study by the Organisation for Economic Co-operation and Development (OECD) found that Australians are doing better at accumulating money than they are at managing their retirements. For example, the transfer of funds from the superannuation product to the pension product doesn’t happen automatically; the decision must be made by the retiree and executed manually.
Due to the instability of financial markets, investments are vulnerable to huge losses, forcing retirees to draw from their savings instead of adding to them. Many retirees try to lessen the risk of losses by investing in deferred annuities which would ensure that they have enough money for the rest of their lives, but the Australian Taxation Office does not exempt deferred annuities from taxes.
The OECD recommends what they call “life-cycle strategies” in which funds are invested in higher-risk portfolios when the worker is younger, and gradually move to less risky ones as they age. The superannuation industry is currently researching risk overlays, which involve staying in riskier, more aggressive investments, while buying insurance against losses.
According to David Domingo, CEO of Members Alliance Australia, “The impending MySuper reforms appear simple on the surface, but it will take quality, professional advice to manage them properly. For example, the benefits of hedging one’s portfolio through risk overlays can be nullified by the cost, but an unprotected portfolio is a dangerous risk. One wrong decision can result in a loss of income and severely affect the quality of life during retirement.”
While some people will be fortunate or astute enough to manage their own retirement funds without incident, the OECD report indicates that individual retirees aren’t optimising their retirement funds, and that many are sustaining significant losses of income.
While the OECD report doesn’t say it in black and white, the implication is clear: it is now essential to get professional help to maximise one’s retirement funds.
Members Alliance is a leading financial services firm in Australia. Their services include debt conversion and debt reduction strategies, wealth creation methods, tax effective solutions, financial risk management, and many more. They are experts in helping people get the most out of their investments and pensions, and retire to a comfortable lifestyle. For more info please visit their website http://www.membersalliance.com.au/about-us or call them at 1300 365 731.