Boosting confidence in retirement

Every retirement is unique. Maybe dining out isn’t your thing, but you couldn’t bear to give up your weekly exercise classes.

Figuring out how much you can spend in retirement requires planning. And knowing what you can afford to safely spend, based on the savings you have, will also help you to identify any gaps between your expectations and reality.

Accurium, an actuarial business that is part of the Challenger Group, is Australia’s largest provider of actuarial certificates to self-managed superannuation funds. Accurium calculates safe spending rates, taking into account changes in spending patterns over time, as well as the three major risks to your retirement income: inflation, market volatility and longevity.

By testing 2000 simulations, Accurium can calculate, with a degree of confidence, the level of spending your savings balance can safely support.

What is a ‘safe’ spending level?
A spending level is considered to be ‘safe’ if the household can continue spending its desired amount for at least as long as both spouses live, with the required level of confidence. You may have a different idea as to the amount you can safely spend and still have confidence that your savings will last.

The tables below, from Challenger’s A guide to a confident retirement, are provided for illustrative purposes only and show the ‘safe’ spending rates (spending income from all sources including any Age Pension entitlement) for couples and singles of different levels of wealth, retiring today aged 66. For the complete tables, download the guide.

A retirement spending planner, such as those here, will help you determine how much you may ‘need’ in order to meet your basic living costs and how much you ‘want’ to cover discretionary costs in order to maintain your desired lifestyle in retirement. Ideally, this should closely match what you can safely spend.

But what if there’s a gap between what you think you’ll be spending in retirement and what you can safely spend? If your basic living and discretionary costs are less than you can afford to spend, you may be being too conservative and not living the life that you could.

Or if your basic living and discretionary costs are more than you can afford to spend with the required level of confidence, you run the real risk of running out of savings later in life.

The retirement danger zone
Running out of money later in life is a big concern for many retirees.

In YourLifeChoices’ 2019 Retirement Matters Survey, respondents were asked if they had the amount of savings that they believed they needed for the retirement they wanted. Of the 5100 respondents, 59 per cent said no.

There are investments you can make to ensure you don’t run out of income later in retirement as there are risks that living longer, inflation and share market volatility can have on your savings and income. If you only invest in market-linked investments, such as via an account-based pension, there is a chance that you’ll end up in what Challenger has called the ‘retirement danger zone’.

As shown below, this is a period later in retirement where you may be unable to continue to cover your basic living costs due to the income from your market-linked account-based pension running out.

If you’d like to find out more about how to look forward with confidence in retirement, download Challenger’s A guide to a confident retirement.

Challenger is a preferred partner of YourLifeChoices.

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DISCLAIMER: All content in the Retirement Affordability Index™ is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances. Before making a decision about whether to acquire or continue to hold a financial product, you should obtain and consider the Product Disclosure Statement (PDS) for the relevant product. A copy of the relevant PDS for a Challenger product can be obtained from your financial adviser, by calling 13 35 66, or at

Written by Challenger Group


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