Most SMSF members are well placed to be able to afford a comfortable retirement, according to new research.
Despite the current economic outlook most SMSF members “can be reasonably confident of affording a comfortable retirement,” according to joint research by actuarial and retirement firm Accurium and the SMSF Association, titled SMSF Retirement Insights: Are trustees prepared for retirement?
The research, the fifth in Accurium’s Retirement Insights series, found that SMSF couples over the age of 57 with a median balance can be reasonably confident, defined as 80%, of being able to afford the ASFA ‘comfortable’ retirement standard – currently $58,922 per annum for a couple.
“However, the proportion of SMSF couples who aren’t in this fortunate position has increased compared to our analysis last year. The proportion of 65 year-old SMSF couples unable to afford the ASFA Comfortable standard with an 80% confidence level has increased from 25% to 30% over the year,” says the report.
The modelling also shows that couples age 65 with the median balance can be “reasonably confident” of a retirement income of $70,000 per annum. However a median balance is insufficient to support a ‘SMSF Aspirational lifestyle’, of $100,000 p.a., “regardless of age”.
SMSF Association Managing Director/CEO Andrea Slattery said: “This significant research highlights the fact even in the face of uncertain and lower yielding investment markets, the SMSF sector still provides the best option for people to enjoy a dignified and secure retirement.
“The proof of the strength of the SMSF sector is in the retirement adequacy numbers – SMSFs are in a great position to enjoy a comfortable retirement.”
“But the fact there has been a slight growth in the number of trustees who can’t be confident of achieving their lifestyle goals is cause for concern and highlights the need for them to get specialist advice.
“Decisions around how much to spend each year in retirement, how essential expenditure will be met and how to adjust asset allocations in light of potentially lower yielding markets are the most important part of any retirement plan. It is in this area where accredited SMSF professionals have the competency to provide real value to their clients who are nearing and in retirement.”
Accurium’s Senior Actuary, Douglas McBirnie, said: “Our research shows that SMSFs are generally well prepared for retirement. However, lower expected investment returns means that trustees need to review their retirement plans to ensure their capital remains sufficient to support their retirement goals.”
The research is based on Accurium’s database of over 65,000 SMSFs.