Spend your age and a bit more

Australians actuaries have worked out a simple ‘rule of thumb’ to reduce your risk of running out of retirement savings and ensure you have a better retirement.

The actuaries ran a range of complex equations and calculations and boiled them down to a simple rule that will help single retirees who have reached Age Pension eligibility age, and who are receiving a part or full Age Pension but who choose not to seek financial advice at retirement.

YourLifeChoices members have repeatedly stated in our many surveys that their biggest concern in retirement is running out of money.

Many will err on the side of caution when it comes to drawing down an optimal amount for the most comfortable retirement they can afford.

This rule of thumb will instil higher confidence that retirees are able to draw down a little bit more of their savings than the minimum required by the government.


“Many retirees draw a bare minimum from their account-based pensions, or their savings, after they stop work,” said Actuaries Institute president Nicolette Rubinsztein.

“They can’t afford to pay for professional advice from a planner, and they live frugal lives because they fear outliving their savings. But the ‘rule of thumb’ is simple and accurate and takes into consideration a retiree’s asset base and age.”

The rule of thumb throws aside the need for complex drawdown calculations and is based on dynamic programming that can be flexible enough to work for everyone, no matter their income or savings.

“Excellent techniques for computing optimal spending for individuals are available but these are complex. It has not been possible to find drawdown rules that are simple and optimal for everyone,” said Actuaries Institute chief Elayne Grace.

“But the Working Group has developed a guide that could help Australians have a better retirement. All the rules respond to Age Pension testing parameters, which makes this work very important for a large number of Australians.”

The simplest ‘rule of thumb’ guide is that a single retiree should:

  • draw down a baseline rate, as a percentage, that is the first digit of their age
  • add 2 per cent if their account balance is between $250,000 and $500,000
  • the above is subject to meeting the statutory minimum drawdown rule.


So, a single retiree aged 60 to 69, who retires with a super balance of $350,000, could draw down eight per cent of their savings: six per cent representing their decennial age, plus an extra two per cent.

“The federal government has encouraged the industry to develop better products to help ensure retirees don’t outlive their spending. But that’s still a way off. In the meantime, we’ve taken a complicated set of equations and scenarios, and worked out what is a simple guideline that works,” said John De Ravin, one of the actuaries who devised the rule.

What do you think of this rule? Would it work for you?

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Most retirees will run out of money
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Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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