Sizable portion of SMSFs at risk of running out of savings
Despite the SMSF sector having higher-than-average savings and spending capacity, new research indicates about a quarter of SMSFs are at risk of running out of funds.
According to Accurium’s latest report, 26 per cent of SMSF retiree couples could run out of superannuation savings during retirement.
Accurium categorised a further 25 per cent as ‘growers’ who will increase their savings in retirement; 28 per cent as ‘preservers’ who will retain most of their savings; and about 20 per cent as ‘spenders’ who will spend the bulk of their savings in retirement.
These figures are based on a typical SMSF retirement spending goal of $80,000 per year, which is $20,000 higher than ASFA’s benchmark for a comfortable retirement.
Accurium classes as aspirational spend for SMSFs as $100,000 annually, and about 24 per cent of SMSF couples are aiming to spend over that annually in retirement.
Speaking to SMSF Adviser, Accurium’s general manager and signing actuary, Doug McBirnie, said the research indicates that there’s a significant portion of trustees needing to re-think their savings strategies to “last the distance”
Paying attention to client patterns - such as whether they fit into a grower, preserver, or spender category - will be conducive to working out the right strategies for retirement, Mr McBirnie said.
“As people retire, the key question changes from ‘have I saved enough’ to “how much can I spend’ from these savings,” said Mr McBirnie.
“To answer this question, the retiree should consider whether their goal is to grow, preserve or spend their savings over retirement,” he said.
“Many SMSF retirees adopt similar financial strategies when it comes to spending, but this report highlights that retirees should think differently,” he added.