Hey big spender
Successive ABS Retirement and Retirement Intentions reports show that more than a third of retirees who take superannuation lump sums use at least some of the money to pay off homes, upgrade homes or undertake home renovations.
It seems that some fund members wait until getting their super before installing a dream kitchen or bathroom.
With superannuation lump sums, many new retirees gain control over the biggest sum that they will ever have readily at their disposal. This is finally their money to invest or spend as they see fit.
However, a proportion of these retirees are particularly vulnerable to unwise investment strategies or the temptation to freely spend on more expensive housing, overseas holidays and new cars.
And others, of course, spend some of the money to pay off debt accumulated during their working lives.
It may seem surprising to many of us who recognise the challenge of trying to provide for a retirement that may last 25 years or so that almost 60% of Australian retirees over 45 have taken their super as a lump sum, according to the latest ABS Retirement and Retirement Intentions report. (The latest statistics were gathered during 2008-09 and released in December last year.)
It seems such a sensible personal finance strategy to try to pay off debt while still in the workforce.
Apart from taking advantage of the quality financial education offered by super funds and the like, it may be worthwhile gaining professional advice about personal debt control and the need to try to provide for a long retirement.
ASIC’s consumer website, FIDO, always has excellent budgeting and debt-control tips.
Your lump sum may not seem such a huge cash pile when you really think about how long it has to last.
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Robin Bowerman, Vanguard Investments Australia's Head of Retail, has more than two decades of experience in the finance industry as a writer, commentator and editor.