Retirement Income Strategies

While no one can predict exactly how long their retirement will last, there are resources available that you can use for guidance.

Depending on how long you live, this may mean that your retirement could be longer than your working life. 

You’ll need to factor an expected period of retirement into your retirement plan to determine whether your income target is achievable or whether you should reassess your desired lifestyle.  

The Australian Bureau of Statistics and the Australian Government Actuary publish life expectancy tables which you may find helpful when considering your own period of retirement. 

When developing our Retirement Income Strategy, we’ve utilised a period of retirement of 22 years, based on the Australian Bureau of Statistics average life expectancy of a female aged 65 today. Your own period of retirement could be longer or shorter than this.

Our definition of maximising your retirement income is meeting the income target (the amount needed to maintain your lifestyle) for as long as is sustainable within retirement. 

Maximising your income is not about drawing the largest annual income possible from your savings but instead ensuring that you can draw an income that meets your needs for the longest amount of time.

What this means is that while you may have the ability to draw a retirement income that exceeds your income target, if you’re not going to use it then any money over and above the target can be considered as surplus to your needs. It is this surplus that should be used to extend the longevity of your income, helping to ensure that you don’t outlive your retirement savings.

If you don’t have the ability to meet your income target, you’ll need to assess where your retirement income might come from and whether there can be adjustments made to the target itself that will ensure you can draw an income that will sustain your needs for the period of retirement.

Our Retirement calculator allows you to see what you might be retiring with, how long it can last, and what that translates to in annual income. It allows you to assess different levels of income and include other sources such as the Age Pension.

There are four key risks associated with funding your retirement lifestyle that you need to consider and balance when making decisions that will maximise your retirement income.

• Investment risk – the chance that the actual value of, or return from, an investment may be less than its expected value or return.  
• Inflation risk – the risk that money held today will retain its equivalent value tomorrow.
• Longevity risk – the risk that you will outlive your retirement savings or the ability to receive a retirement income. 
• Sequencing risk – the ability to enter or exit the market at a time appropriate to you.

You should understand your tolerance to these risks and consider choosing investments that align with it and the affect that will have on the ability to meet your chosen income target.  

Equip Super offers a selection of investments to suit your needs including our set-and-forget MyPension investment strategy. 

Our retirement income strategies are designed around the use of our Retirement Income account and the MyPension investment strategy.  

By now you may have set your income target, considered your retirement period and determined how to balance the risks to maximise your income. 

During that exercise you would have considered how much money you’ll need regularly but have you considered how much you may need on an ad-hoc basis to cover for both planned and unplanned expenses? 

Generally having access to funds will be a trade-off between:

• Receiving guaranteed income payments 
• An opportunity for higher investment returns
• Limiting your investment choice

Think about whether your income target includes an allocation for large, unexpected expenses or whether you’d like the ability to dip into your savings as needed or at a planned time. Understanding this can help you to choose a retirement product (or combination of products) that will best meet your needs. 

You can learn more about accessing your super in retirement here and how your super can be used as an income stream here. 

Our retirement income strategy has taken a position that full access to superannuation savings is in the best interest of members when providing generic strategies. We use the Retirement Income account and the MyPension investment strategy in combination with the Age Pension to ensure access while balancing the risks.