Life is really just a series of challenges. There is the car payment/rent/phone/entertainment bill juggling challenge. Once you get that under control along comes the long-term stuff like mortgages and school fees. Then comes the retirement challenge.
Retirement may sound like one challenge but in reality it is likely to comprise several phases as it hopefully will span 20 to 30 years.
The framing of the debate around retirement has understandably been focused heavily on the accumulation phase - and the structure of the superannuation system reflects that. There are lots of rules and restrictions around contributions and the accumulation phase and endless discussion around the right investment approach to ensure people get to retirement with adequate savings.
But once you get to retirement age suddenly you are given the withdrawal key to all the money you have accumulated and essentially set loose to figure out how to manage and invest it in retirement.
There is broad agreement that the retirement part of our superannuation system is a work in progress and the Financial System Inquiry headed by David Murray has identified this as an area of focus and where more work needs to be done.
For people in - or approaching - retirement the next 12 months or so could be rather unsettling because the Murray inquiry is likely to be a catalyst for a lively and wide-ranging debate on the best way to structure the retirement income part of our superannuation system.
One of the first to enter the fray is the leading independent consulting group Rice Warner with a discussion paper (Retirement Savings Gap research) that was commissioned by the Financial Services Council.
Rice Warner charts the superannuation journey from accumulation to transition to retirement to active retirement to sedentary retirement into the frail years. They see three distinct phases of retirement - active (ages 65-75), passive (65-85) and frail (ages 75-100)
They then go on to challenge current thinking about how account-based pensions should be structured to deliver the desired outcome for retirees.
Rice Warner are advocating separate asset pools to match liabilities - a so-called "bucket" approach where, depending on your account balance, you would take so much as a lump sum at retirement to cover immediate expenditure, put some into a "liquidity" pool to cover pension payments for the next few years, have a "nest egg" bucket for emergencies and finally a "growth" bucket for later years in retirement and/or bequest to family/charity.
One of the basic propositions of the Rice Warner proposal is that retirees need a relatively high allocation to growth assets and they argue a growth-oriented portfolio in conjunction with a cash account is a better way to manage the drawdown phase.
Expect others to argue for some level of mandatory purchase of annuities and/or changes to the tax treatment of pensions drawn from super.
This will most certainly not be the last word in the debate about what is the best retirement income approach. But for the average self-managed super fund the Rice Warner approach of a growth portfolio focussed on Australian shares to harvest dividend imputation credits coupled with a cash account will not seem that radical an idea.
The framing of the debate around retirement has understandably been focused heavily on the accumulation phase - and the structure of the superannuation system reflects that. There are lots of rules and restrictions around contributions and the accumulation phase and endless discussion around the right investment approach to ensure people get to retirement with adequate savings.
But once you get to retirement age suddenly you are given the withdrawal key to all the money you have accumulated and essentially set loose to figure out how to manage and invest it in retirement.
There is broad agreement that the retirement part of our superannuation system is a work in progress and the Financial System Inquiry headed by David Murray has identified this as an area of focus and where more work needs to be done.
For people in - or approaching - retirement the next 12 months or so could be rather unsettling because the Murray inquiry is likely to be a catalyst for a lively and wide-ranging debate on the best way to structure the retirement income part of our superannuation system.
One of the first to enter the fray is the leading independent consulting group Rice Warner with a discussion paper (Retirement Savings Gap research) that was commissioned by the Financial Services Council.
Rice Warner charts the superannuation journey from accumulation to transition to retirement to active retirement to sedentary retirement into the frail years. They see three distinct phases of retirement - active (ages 65-75), passive (65-85) and frail (ages 75-100)
They then go on to challenge current thinking about how account-based pensions should be structured to deliver the desired outcome for retirees.
Rice Warner are advocating separate asset pools to match liabilities - a so-called "bucket" approach where, depending on your account balance, you would take so much as a lump sum at retirement to cover immediate expenditure, put some into a "liquidity" pool to cover pension payments for the next few years, have a "nest egg" bucket for emergencies and finally a "growth" bucket for later years in retirement and/or bequest to family/charity.
One of the basic propositions of the Rice Warner proposal is that retirees need a relatively high allocation to growth assets and they argue a growth-oriented portfolio in conjunction with a cash account is a better way to manage the drawdown phase.
Expect others to argue for some level of mandatory purchase of annuities and/or changes to the tax treatment of pensions drawn from super.
This will most certainly not be the last word in the debate about what is the best retirement income approach. But for the average self-managed super fund the Rice Warner approach of a growth portfolio focussed on Australian shares to harvest dividend imputation credits coupled with a cash account will not seem that radical an idea.
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