When commenting on the 2019 World Happiness Report, at the recent Happiness and Its Causes Conference, Dr Michael Mosley said “Lots of factors make you happy. But the three most important things…are relationships, money and health”.
Happiness in retirement will mean different things to different people. For some, it will mean more free time to pursue what they want, when they want and how they want. This may be such activities as time with family, travel, hobbies, lying on the beach or even a new business venture. People will manage their own relationships and can maintain a healthy lifestyle, but finances also need to be managed.
Financial security, like happiness will mean different things to different people but some common elements are having security of accommodation, affording health care and making sure your money lasts.
Financial security may simply mean living off the Age Pension, in part or in full. We know that for many Australians this is the reality and they do get by on the Age Pension. The key phrase here is “get by”, as this pension won’t necessarily allow them to maintain the standard of living to which they are used to, travel or pursue hobbies. This may suit some but for many it won’t be the retirement they had hoped for.
Many Australians who retire will take a lump sum from their superannuation fund, and when this runs out, will go onto the Age Pension. Others will set up an account-based pension, drawing down an income each year until their money runs out before falling back on the Age Pension. Some may draw down the minimum amount allowed from their account-based pension, living frugally either to make sure their money lasts, or to try and leave an inheritance for their children.
In the past, there have been very limited ways for retirees to secure their income. They could secure their homes, their cars and their health through insurance but they could not insure their income…until now.
A Real Lifetime Pension is a new product that can be used in combination with an account-based pension. It provides retirees with investment choice and a secure income no matter how long they live; all in return for a relatively low insurance premium.
What’s more, from 1 July 2019 the income from a Real Lifetime Pension will benefit from the new Social Security rules that provide for enhanced concessional treatment from Centrelink.
Ideally, Australians should be able to use their retirement savings to enjoy life without worrying about their money running out. By offering a Real Lifetime Pension as a white label product, superannuation funds will be able to demonstrate that they are acting in the best interests of their retirees.
An income for life will not guarantee happiness but it can go a long way to removing the anxiety and fear of running out of money. Less worry will mean a greater chance of a happier retirement.