Income in Retirement: 3 Options for Retirees

Are you often wondering how you’ll manage financially once you step away from the workforce?

With increasing lifespans and fluctuating global financial markets, ensuring your retirement savings lasts is more crucial than ever. Many retirees find themselves trying to figure out how to spend their savings effectively, risking not fully benefiting from their years of hard-earned superannuation.

Thankfully, with the right strategies and modern financial solutions, you can find a balance between enjoying your retirement now and securing your finances for the future.

Maintaining a steady income once you retire is essential, and thankfully, it doesn’t mean giving up the financial stability you’ve grown accustomed to during your working years. Adjusting our financial mindset and planning appropriately can make transitioning from a regular paycheck to retirement income seamless and stress-free.

Continuous Income in Retirement

Many people are used to the comfort of a steady income stream during their working years. Entering retirement shouldn’t mean giving up this stability. Shifting from earning a salary to relying on various sources of retirement income can be smooth with the proper planning and adjustments to our usual financial perceptions.

Superannuation forms a crucial component of your retirement strategy, but it’s not the sole source. Most retirees will also draw income from other investments such as shares, property, or even the Age Pension (more on the Age Pension below).

Diversified Retirement Portfolio

Like any investment strategy, a diversified approach to sourcing retirement income helps balance risks and returns.

A fulfilling retirement is a goal shared by all, and it comes with a common requirement… income.

Retirement products designed to provide lifetime income offer guaranteed payments, ensuring a reliable income stream regardless of lifespan. With a robust investment portfolio, you can spend confidently and enjoy your retirement without financial worries.

Understanding Key Retirement Income Sources

Let’s explore three primary sources of income for retirees, clarifying some common misconceptions along the way.

Income from Your Super: Account-based Pensions

One popular option is converting your superannuation into an account-based pension, which provides regular income during retirement. You have the flexibility to decide the frequency and amount of your withdrawals as long as they meet the minimum withdrawal requirements. While this allows for adjusting withdrawals to match inflation, there’s a risk of depleting your funds depending on how much you take out and the returns on your investments.

A common and critical misunderstanding about account-based pensions is the assumption of endless payouts. In reality, once your super balance is exhausted, so too are the payments.

Lifetime Income Streams (Lifetime Annuities)

Lifetime income streams, such as lifetime annuities, offer a fixed, regular income in exchange for a lump sum investment from your super or savings. Our annuities can be tailored with options for fixed payments or those adjusting with inflation, interest rates, or market changes. Annuities ensure income for life, covering you and potentially your spouse, thus safeguarding against longevity risk.

Combining an annuity with an account-based pension is not only possible but advisable. This strategy allows you to secure a portion of your income for life, enhancing confidence in your financial stability throughout retirement.

Income from Age Pension (Centrelink Age pension)

Upon reaching the eligible age, the Age Pension may serve as a supplementary income source, subject to Centrelink’s assets and income tests. While the Age Pension provides a safety net, it often falls short of covering all living expenses, making it clear that relying solely on this government benefit is insufficient for a comfortable retirement.

Crafting a Resilient Retirement Portfolio

Intelligently blending your income sources ensures you have adequate funds for today and the future.

A comprehensive retirement income plan should ensure that all your bases are covered by establishing a safety net income that covers basic living expenses. This can be achieved by supplementing the Age Pension with annuities, securing a steady flow of funds for your essential day-to-day needs.

For more flexible financial needs such as dining out or travel, allocate income from less certain sources like account-based pensions. This approach allows you to enjoy discretionary spending without impacting the stability of your core financial needs in retirement.

A strategic approach to retirement income planning ensures that your transition from earning a salary to utilising your retirement savings doesn’t keep you up at night. By understanding and utilising various income sources effectively, you can achieve both the peace of mind and the financial stability needed to fully enjoy your retirement years.

Collective Wealth Advisers provides a financial roadmap centred around making the most of your money. Through proven wealth planning, tax minimisation and cash management strategies, we facilitate clarity and security when you need it most throughout your retirement journey.

Our team of experienced advisors is available to assist you throughout the entire process and provide answers to your questions. Get in touch with us now to begin your retirement planning journey.

  • Collective
  • Apr 25 2024
  • Retirement Planning
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