The argument that people in their mid-50s should reduce their exposure to shares in their superannuation fund (Over-50s overexposed, 12 August) doesn’t take into account the fact that most of these members still have a relatively long term investment horizon.
At the age of 55, the average Australian male is expected to live for another 28.5 years; and the average female 31.6 years. Our modelling shows, on average, 66% of the superannuation income spent by individuals in retirement will come from investment returns generated during their retirement years. It follows that a switch to defensive assets too early could seriously limit one’s ability to generate an adequate income for life. Mercer’s view is individuals in their 50s or 60s should be majority weighted to growth assets, including but not limited to listed shares.
While the current stock market volatility and its impact on superannuation is a serious concern, we should all not lose sight of the longer term objectives when making decisions about superannuation.
The underlying issue that needs to be debated is how providers and the Government can better protect the many Australians whose retirement savings will remain in a default investment option in a default super fund. In our firm’s view, the solution lies in creating a landscape that encourages people to think about superannuation as a “whole of life” investment, not just for their working life. Better fund design and default investment options are needed to serve an individual’s life stage from accumulation (working) through decumulation (retirement) and provide longevity protection.
This letter to the editor was published in the Australian Financial Review on Wednesday 17th August, 2011
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