Income layering gives 99% success rate
Income layering can give a 99 per cent probability of securing a self-managed superannuation fund (SMSF) retiree's essential spending needs, according to a report.
SMSF service provider, Accurium's latest SMSF report found income layering, which blends guaranteed lifetime income and market linked investments, could be used to provide confidence levels that are just shy of perfect.
Accurium chief executive, Tracy Williams, said "we know retirees are often highly risk averse, so SMSF retirees can be comforted by the fact that this type of strategy can give a 99 per cent probability of securing their essential spending needs".
The report also found using an income bucketing strategy could provide a median balanced five per cent higher than a traditional balanced portfolio.
"When markets perform well, the typical SMSF using income bucketing could see a balance of $99,000, or six per cent higher than a traditional balanced portfolio," Williams said.
However, Williams said the most surprising result from the report was that the safe withdrawal rate of four per cent was of little practical relevance to the majority of Australian retirees.
"While this seems sensible in theory, it doesn't translate practically. This is because it doesn't take into account the uneven income provided by the means-tested Age Pension," she said.
The report said it also did not factor in minimum drawdown retirements which begin at five per cent.
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