“The second bucket says, if that’s the minimum  I could tolerate, how much money do I need for  the sort of lifestyle I desire and strive to achieve  in retirement?

If you’ve got enough money to go  beyond that, people can start to plan to leave some  money behind, for their children or grandchildren, or make a bequest to a charity. [The final bucket] is for the super rich or super frugal who basically have  so much money they couldn’t possibly spend it –  people like Warren Buffett.”

Categorising your money in this way means  you can take different approaches to each wealth  bucket, Schubert says.

“Once you move beyond [the essentials bucket]  and you’re into funding your preferred lifestyle you  can be a bit more flexible,” he says.

“If you live a long time and the money starts  to run out, you might have to tighten the belt a bit,  but at least you’re doing that from a base where  you’re enjoying the lifestyle you aspire to, rather  than down there at the very frugal stage.”

In times like this, it’s important for planners  with post-retirement clients to reassess clients’  investment options within their superannuation  funds, and consider whether the particular strategy  remains appropriate.

Crissy DeManuele, technical services manager  at Suncorp, says planners should also look at how  they can help their clients with potentially gaining  more access to Centrelink benefits.

“For example, they may be eligible for an Age  Pension that they previously weren’t eligible for due  to their level of income or assets,” she says.

“That not only provides them with some sort  of income, it may also give them access to conces-  sion cards and other benefits that come along with  receiving the Age Pension.”

Where people’s superannuation balance has de-  clined, the tax-free components may have increased,  DeManuele says.

“Moving the money into an allocated pension  crystallises the tax-free component and that way,  any future earnings in the allocated pension will  be added back to the tax-free component in the  proportion it currently holds, whereas if it’s in accumulation it will potentially add back to the taxable  component,” she says.

Lifetime and fixed-term annuities have  traditionally been viewed as inflexible by financial  planners, because the money is locked away, the rate  of return is low and when the client dies, the full  capital is not necessarily returned to their beneficiaries.

However, they do offer certainty and a guaranteed rate of return, which in this environment is looking increasingly attractive for retirees.

“Now that post-retirees and pre-retirees have  had a bit of a shock and they’ve seen their balances  decline, they perhaps will be looking for more  capital guaranteed options and you’ll probably find  things like lifetime annuities and fixed-term annui-  ties may become a bit more popular,” DeManuele  says.

“In times like this where allocated pension balances and super balances are declining, if you have  a lifetime annuity or fixed-term annuity you’re still  getting your fixed rate of return regardless of what’s  going on in the economy.”

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