Research tells us Australians have one of the longest life expectancies in the world1 and we can expect to live well into our 80s2. Due to our improved health and ‘active ageing’, around 40,000 of us will be over 100 by the year 2054-553.
While this might be great news if you’re looking forward to a long and healthy retirement, it might also be a concern if you don’t have enough money to last those extra years.
On the other hand, if you live too frugally in retirement and don’t spend all your savings, you could also leave an unexpected inheritance to your family or estate.
It’s important to understand, and plan for, your ‘longevity risk’ – the chances of you outliving your retirement savings, or not having enough savings to fund your retirement. Fortunately, there are a few things you can do to help manage this risk.
1. Work out how long you can expect to live
Everyone’s situation is different, so use our life expectancy calculator to estimate this based on factors, such as your age, health, and work/life balance. It may seem a bit daunting, but it’ll help you work out how many years you’ll need to save for, so you can avoid running out of money when you need it most.
2. Assess your income sources
- The Age Pension. If you meet the criteria to receive the Age Pension, you can expect to receive a regular income. However, bear in mind that it may not be enough to fund the lifestyle you desire when you stop working. June 2017 figures from the Association of Superannuation Funds of Australia4 suggest that singles and couples around age 65 need $43,695 and $60,063 respectively to live a comfortable lifestyle. This assumes people own their home outright and are in relatively good health.
- Superannuation. Some people take their super as a lump sum, while others opt for an account-based pension which provides a regular income for an agreed amount of time in retirement.
- Investments. You may have investments, or be planning to downsize your house or sell another property to help boost your savings.
- Savings. You may have money put aside in bank term deposits or savings accounts which you could choose to keep for everyday purchases, such as bills, food, and transport.
- Inheritance. Perhaps you might be expecting to inherit property or proceeds from your family’s estate, which may help you out in later years.
Whatever income sources you expect to have, it’s important to make sure these will be enough to sustain your lifestyle through 20 to 30 or more years of retirement.
3. Get some support
Striking that balance between making sure you don't outlive your retirement savings and having a comfortable lifestyle in retirement can be a confronting task.
So if you’d like to know more about how to manage your money, try our budget planner calculator or work out a savings plan. Our online learning module Managing your money in retirement is another great resource to check out.
There may also be tax, legal and other implications, so see your financial adviser to work out what’s right for your situation. If you don’t have an adviser, call us on 131 267 or use our find our adviser tool.
Downsizing to a coastal town or regional hub can hold lifestyle appeal, but don’t bank on it as a strategy to fund your retirement.