Severe inadequacies in retiree portfolios: VicSuper

New research by $16 billion superannuation fund VicSuper suggests up to 50% of retirees aged 75 to 79 with defensive portfolios will outlive their savings.

More broadly, the research also found that around 30% of retirees in that age bracket, regardless of their investment strategy, will run out of savings. Couple this with the fact that VicSuper only found 8% of pre-retirees to be financially prepared for retirement, and it's unsurprising the super fund said "the situation is unlikely to improve for the next generation."

Addressing the cause of retirement savings inadequacy, VicSuper pointed to a combination of increasing life expectancies, changing expectations about retirement lifestyles and a lack of awareness regarding ideal drawdown rates.

Citing an HSBC report, VicSuper said 45% of Australians expect their social lives to improve in retirement, and 50% are drawing down more than the minimum amount each year to fund their retirement goals. Given that World Health Organisation data suggests an Australian woman aged 64 can expect to live to 87, while the average age for retirement has remained static at 65 since the 1950s, Australia's superannuation sector will need to adjust to these generational challenges.

The super fund said that Australia's retirement income industry will need to roll out more products like VicSuper's own guaranteed income accounts, which "offer longer-term stability for retirees by providing secure, monthly payments to address retiree's needs."

VicSuper chief executive Michael Dundon said: "While super funds are looking into ways of making the system more sustainable, we all have individual responsibility to start planning for retirement sooner rather than later, researching how long we can expect to live and setting our expectations for our lifestyle during retirement. If we all keep an eye on the long game, there will be plenty to be optimistic about for our future."

Read more: VicSuperAustraliaAustraliansMichael DundonWorld Health Organisation
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