Forget FOMO: How to grapple with the ‘fear of running out’ in retirement

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Are you a sufferer of one of the most prevalent retirement-related diseases in the country? Have you got FORO? Despite the talk of exciting and ambitious retirements, the “fear of running out” is a big issue for pre-retirees and retirees.

In fact, if you have it, you are among the majority of people over 55 who are trying to balance the rising cost of living and anxiety about hopeful visions of “the good life”. A poll from my Facebook group this week showed more than 60 per cent of people approaching and in retirement fear running out of money.

Most people at or nearing retirement age have far less superannuation than is recommended for a comfortable retirement.Credit: Dominic Lorrimer

As a nation, we’ve been contributing to super for 31 years. And despite this, the reality is, most Australians only get their act together on their superannuation growth strategies in their 50s and 60s.

Before this, they are busy raising their kids and paying off their mortgages and have little left over for long-term savings. And that means many people in the next decade will be scrambling to put together enough super to live comfortably in their retirement – despite the trillions of dollars in the retirement system.

The median superannuation balance of people aged between 55 and 74 in Australia currently sits somewhere between $150,000 and $200,000, well below the amount that the Australian Superannuation Funds Association (ASFA) says will afford you a comfortable retirement.

A comfortable retirement, according to ASFA requires you to have $595,000 for singles and $690,000 for couples in your superannuation, as well as access to a part pension. And this assumes you own your own home outright. So if you are one of the average pre-or-post retirees who simply don’t have this much in super, how do you manage your FORO?

I’ve watched many retirees navigate life with this fear, and live full and energetic lives.

There’s no easy answer, but I’ve put together some practical steps you can take so you can at least reason with your fears.

Understand your financial situation. Take the time to really understand your balance sheet. Think about assets and liabilities, income sources and expenses today. Think about your home if you own it, and whether downsizing is a sensible possibility to get more money into superannuation. And make sure you consider any pension eligibility in the future.

When you understand your true financial standing today, you can then be honest about some decisions you might be able to make before you retire to get more money into superannuation, decrease debts and make life more sustainable in the future.

Create a comprehensive retirement budget. Take the time to build out a detailed cost-of-living budget for retirement, projecting how much money you will need to live on each month and year. Be realistic in your estimates, knowing that honesty now will help you find strategies that can calm your fears.

Project the sources of your future retirement income. When you retire you move from earning your primary income from working, to drawing your primary income from other sources, like an account-based pension from your superannuation fund, an age pension from Centrelink and maybe some supplementary income from working.

It is a valuable exercise to go through to project what your income sources will be and how much you can potentially expect to receive from each. It helps you understand how much passive income you can rely on and how much you need to find from working. You can use the retirement planner on the federal government-run Moneysmart website to help you.

Get advice on investment and withdrawal strategies. Two of the most complex parts of retirement planning are knowing how to invest superannuation as your risk appetite changes, and knowing how much you should feel comfortable to draw down once in retirement.

Both are excellent questions for a financial adviser, when you are ready to listen to their answer and implement their strategies. Depending on the complexity, if you have a relatively small super balance you might find support from an adviser through your superannuation fund is all you need to make these decisions.

It’s worth noting that when you reach retirement or preservation age and flip your superannuation over from accumulation to retirement phase, the government requires you to draw down a minimum amount based on your age, starting at 4 per cent up to the age of 64, 5 per cent from 65 to 74 and increasing after that. This is done in an attempt to encourage people to spend their money on their retirement.

Explore part-time work or employment opportunities. You can be retired and still work – the two are not mutually exclusive. In fact, if you’re concerned about not having enough funds to generate you a passive income, working part-time, casual or even seasonal work is a great way to quell some of your anxiety. In addition to providing you with a little more income, work can keep you mentally and socially engaged, and enhance your overall well-being.

And my best tip, remain adaptable and stay proactive. I’ve watched many retirees navigate life with this fear, and live full and energetic lives. The key is in knowing the truth of your situation and doing the best you can with what’s available to you.

Bec Wilson is author of How to Have an Epic Retirement, which is now available online and in all major booksellers. She writes a weekly email newsletter for pre- and post-retirees at epicretirement.net.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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