Retirement is often painted as a golden period; a time for people to relax and enjoy the fruits of their labour. But even if they aim to maintain a similar lifestyle once they retire, their expenses will almost certainly change. Just as life evolves, so do people’s spending habits.
An analysis of how retirees typically spend over their lifetimes – from early to middle and late retirement – explains why it may be wise to adjust their financial planning too. Let’s unpack how each stage might play out for your clients.
Early retirement: A burst of activity
In early retirement, many people are eager to tick off items on their bucket lists and adapt their living situations in ways that give them more meaning. Whether it’s travelling more, pursuing hobbies, giving back to communities, or spoiling grandchildren, this phase often sees a surge in spending.
During this period, holidays, leisure activities, the costs of moving to live closer to family, and perhaps even deferred purchases all contribute to higher expenses. It’s likely that your clients may want more discretionary income during this time to keep up.
Middle retirement: Finding a new pace
As retirement progresses, expenses typically stabilise or even decrease. With the initial burst of activity settling, retirees might find themselves spending less on certain things. Perhaps they’ve already travelled to their dream destinations or completed major home renovations, and life now quiets down to more predictable activities, habits, and pastimes.
It’s often the case that your clients could afford for their income to adjust lower during this period.
Late retirement: Navigating healthcare costs
In later retirement, healthcare expenses are often a major consideration. As people age, the likelihood of medical needs increases. Whether it’s routine check-ups, medicine, or unforeseen health issues, the costs can add up. A rise in income may now be helpful to meet extra needs and provide financial stability, whatever happens.
The needs-adjustment principle: Is your clients’ income enough for their needs?
As you can see, financial needs can vary quite a bit over retirement. This challenges the idea that expenses rise consistently with inflation and highlights the need to adjust a client’s financial plan to their changing lifestyle.
Typically, expenses are higher at the start and end of retirement than in the middle. By anticipating these changes, you can make sure your clients’ income meets their needs.
At Discovery Invest, we understand how post-retirement financial needs can change, so we’ve designed a brand-new annuity to give your clients the best of both: the peace of mind of a fixed annuity, plus the flexibility of more income when they’re likely to need it.
Introducing the Secured Capital Annuity
The Secured Capital Annuity is a fixed annuity designed to give your clients peace of mind in retirement, through guaranteed income for life. They can leave a capital legacy for their family through life cover and have the freedom to select how their income grows. They can also opt to receive 13th cheques for up to 10 years with age-based income adjustments, designed to match retirement spending habits.
Understanding the changing nature of financial needs in retirement gives your clients the chance to be proactive now in securing their and their family’s future. With features such as life cover for their beneficiaries and 13th cheques, Discovery’s Secured Capital Annuity offers your clients financial control and peace of mind when it matters the most. Learn more here.
This document is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Life Investment Services Pty (Ltd): Registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life assurance products are underwritten by Discovery Life Ltd. Registration number: 1966/003901/06, a licensed life Insurer, an authorised financial service provider and registered credit provider, NCR Reg No. NCRCP3555. All boosts are offered through the insurer, Discovery Life Limited. The insurer reserves the right to review and change the qualifying requirements for boosts at any time. Product Rules, Terms and conditions apply.
