More than half of Australian retirees are spending less than the Age Pension each year due to fear of running out of money in retirement1.
We’ve always been encouraged to save for our retirement. Often we’re bamboozled with articles or advertisements about how to save more and spend less, so it’s understandable that retirees become fearfully frugal when they retire.
Retiring with a dollar amount to last an unknown number of years means that retirees become fearful of spending all their money. They’re concerned they’ll have to rely on the Age Pension and some retirees wish to leave a decent sum of money to their family when they die. In fact, findings have revealed that Australian’s passed on $8.5 billion of their remaining super accounts to family2.
So, why should you spend your super?
The lifestyle perspective
You should enjoy a good standard of living in retirement, if that is what you can afford.
While being frugal isn’t necessarily a bad thing, the issue arises when retirees are unnecessarily choosing to go without.
Retirement isn’t the end, it’s a new stage in your life journey. Your retirement is a time to enjoy the freedom of not working. You have the time to find a hobby, spend time with friends and family, or even do those things that you couldn’t take time off work to do, such as taking a long holiday, or volunteering your time.
While you may only have the funds to take a three week holiday instead of a three month holiday, the issue is that some retirees will choose not to take the holiday at all and save their money rather than spend it. But, it’s important to choose to do the things that will bring you happiness and fun experiences if you can.
The economic perspective
There’s also an economic perspective that supports spending your hard-earned dollars in retirement.
The government provides tax incentives that encourage people to build up their super so they can spend it during retirement and rely less on the Age Pension, not maintain it as a savings pool to be passed on as an inheritance.
In 2016, 1 in 7 people living in Australia were aged 65 and over3. With such a large percentage of the population being retired or reaching retirement age, it’s important that those individuals continue to participate in the economy and that spending habits don’t decline.
Need help with budgeting during your retirement?
If you’re feeling uncertain about spending your hard earned retirement income, seeking advice from a financial planner may help. They’ll be able to give you advice on more than just your super. To book an appointment with one of our qualified financial planners email us at firstname.lastname@example.org or call us on 1800 005 166.
2 https://www.yourlifechoices.com.au/news/retirees-living-in-needless-frugality. Accessed 27 August 2018.