Money
Why are we being mushrooms: do we believe we won’t get older?
Only 51% of Australians have consulted any source of information to work out how to fund the second half of their lives. Do we believe we won’t get older?
By Alex Brooks
New research from the Association of Superannuation Funds of Australia (ASFA) has revealed only half of Australians, including around 60% of those aged 65 or older, have consulted any information about preparing for retirement or getting advice about our superannuation. I mean, what the?
This not only means most Aussies are in the dark about how much money, superannuation or government benefits they will need to rely on later in life – they are wilfully choosing not to rewire their financial knowledge to retire.
Why are we being mushrooms: do we believe we won’t get older?
Awkward and uncomfortable
I reckon there’s two big reasons we live in denial about planning for how we will fund and enjoy the second half of our life.
- Money is awkward: it carries all sorts of emotional baggage, and Australia’s complex rules and expensive financial advice system are failing everyday people.
- Ageing is uncomfortable: all of us are ageist, even those of us getting old enough to know ageing is inevitable.
The saving or “accumulation” phase of superannuation is mainly automatic for most Australians- that means our non-decisions (or defaults) can mostly achieve some sort of ‘satisfactory’ outcome.
But a little intelligent activity before we get too old for compound interest to work on our behalf will do even better.
We need to face the challenge
If we want to stop working on the hamster wheel of the 38-hour week, all of us need to face the challenge of making our accumulated superannuation wealth cover our needs and wants over an uncertain number of remaining years.
We will inevitably face variable costs as we age. Think of things like health (hello cataracts and aching joints), aged care (this won’t mean nursing homes for our generation – it will be home services to keep us living in our homes) and paying for the right type of housing as we get older (who wants to walk up 10 flights of stairs if our knees hurt?).
It’s helpful to frame your early thinking about superannuation as a means to support your critical consumption in later life.
At any age, when we review our financial management and think about what we wish we had known in the past, we should be realistic.
Accessing good-quality information about superannuation and retirement (whatever that might mean to you) actually improves your income. So do it!
Hidden costs of not thinking about it before you need it
The ASFA survey — which was demographically representative of the population in terms of age, gender, education, and location — asked respondents which sources of information they consulted concerning their retirement.
Possible sources included professional service providers (like financial advisors), advice provided by super funds, information published by the superannuation industry, internet resources like online calculators, the media, and social media.
The percentage of people who had consulted each information source was:
- Professional services (financial advisors) — 21%
- Friends and family — 21%
- Online calculators and other online resources — 15%
- Advisors from super funds — 12%
- Media articles — 8%
- Social media — 6%
Younger Australians were more likely to have consulted informal sources like friends and family, and social media. People in the 18–34 cohort were 15 times more likely to source advice from social media than people aged 65+, leaving them far more vulnerable to scams involving superannuation.
Bear in mind that ASFA are the same people who develop the ‘retirement standard’ – the ultimate guide to how much you need to save in super to have a decent retirement income once you hit 67 (the age you can claim the Age Pension in Australia).
ASFA CEO Mary Delahunty said not seeking advice “means many Australians may end up worse off than they should be in their post-working lives, simply because they haven’t been empowered with the relevant guidance.
“This research highlights the need for urgent reform to make high-quality, low-cost advice easily accessible to every Australian worker.”
The numbers are kinda scary - especially if we want a dignified second half of life.
The survey found that Australians of all ages have a high degree of trust in professional financial advisors, advice provided by super funds, and industry benchmarks like the ASFA retirement standard.
Net trust of each source (the percentage of respondents who trust the source minus the percentage of those who do not) per age cohort was as follows:
Cost the main barrier to seeking advice
It’s the cost of professional financial advice – usually a few thousand a year (check out this article) – that stops us engaging with it, learning about it or planning for it.
“Although people trust financial advisors as a source of information, the problem is that their services remain too expensive for the average working Australian to access,” Ms Delahunty said.
Most industry super funds offer free or low-cost financial advice. Call yours and ask what they can do for you. Yes, expect your super fund to offer financial advice that will be biased towards their own pension or income products - but it’s better than not seeking any advice at all.
Or not even thinking about it.
Just get started. It won’t hurt nearly as much as waiting until later on.
This article was originally published in Alex’s weekly Dueto newsletter: sign up here.
Feature image: iStock/Deagreez
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