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On this episode of The nestegg Podcast, host Maja Garaca Djurdjevic and three experts discuss the latest in equities, property investing and super.

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Steve Waters, director of Right Property Group, chats about the latest in property, including the much-talked-about use of macro-prudential measures to cool the rapidly expanding market.

RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about soaring ETFs, what they are and why young investors, in particular, are jumping onboard their latest surge. Dr Zhong also takes a closer look at BNPL platforms.

And lastly, tax and super guru Timothy Munro gives his thoughts on Prime Minister Scott Morrison’s choice to backtrack on any further SG changes and looks at the impending end of the low and middle income tax offset.

Have a question for our experts? Get in touch at [email protected] and you might get featured on the next episode.

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Retirement

New ‘rule of thumb’ for retiree drawdown

By Cameron Micallef

November 07 2019
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Retirement

New ‘rule of thumb’ for retiree drawdown

By Cameron Micallef
November 07 2019

With a huge amount of uncertainty dogging retirees who are trying to decipher what they can and can’t spend in retirement, actuaries have come up with a new “rule of thumb” they say better explains how much a retiree can draw down.

New ‘rule of thumb’ for retiree drawdown

By Cameron Micallef

November 07 2019
Share

Five actuaries have got together to compile a new guide on the amount that retirees should and can pull from their portfolios.

They ran the numbers for a single retiree who has reached age pension eligibility and who is receiving part or a full age pension to find that a retiree can be drawing down based on the first digit in their age.

This means a 67-year-old pensioner should draw down at 6 per cent, while an 85-year-old would draw down on their assets at 8 per cent.

Actuaries Institute president Nicolette Rubinsztein said many people would be better able to enjoy their early retirement if they have higher confidence around being able to draw down a little bit more of their savings than the minimum as is required by the government.

She noted many retirees are only drawing down the bare minimum from their account-based pensions, or their savings, after they stop work.

The rule of thumb also states retirees with balances between $250,000 and $500,000 would benefit from withdrawing an extra 2 per cent from their accounts each year.

Using the example of a single retiree who retires with a superannuation balance of $350,000, the rule of thumb could see a retiree aged 60 to 69 able to confidently draw down 8 per cent of their savings: 6 per cent representing their decennial age, plus an extra 2 per cent.

Actuaries Institute’s chief executive, Elayne Grace, indicated that these calculations are a good guide for uncertain retirees; however, it can be complex and the figures might not be optimal for everybody.

The industry has also argued that the availability of better products would help ensure that retirees don’t outlive their savings.

One of the actuaries behind the new rule of thumb, Mr De Ravin said even if post-retirement products are developed, the current expectation is that, typically, only 25 per cent of someone’s balance would be invested in an annuity.

“If that is the case, then 75 per cent of a typical retirement product will still require a decision by the retiree as to how much of their account-based pension component to draw down,” he said.

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About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

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