Life is for living, while funds last

Life expectancy in Australia has never been higher.

Improvements in healthcare, disease control, diet and medical knowledge have lifted expectations for every generation since the 1880s.

Life expectancy for Australians born today has skyrocketed to 80.5 years for males, according to the Australian Bureau of Statistics (ABS), and to 84.6 years for females.

But there’s more good news.

According to the Australian Government Actuary (AGA), the outlook for 66-year-old men and women today is even higher than the ABS projections. If you’re a 66-year-old male, you can expect to live to 85 and to 87.6 if you are a 66-year-old female. That’s another 19 years for a 66-year-old man today and another 22.6 years for a 66-year-old woman.

Extended projections do not end there.

Once you consider improvements in health, half of today’s 66-year-old males will live to at least 88 and 66-year-old women to 90. And the longer we live, the longer we can expect to live. For example, a male alive at age 90 can, on average, expect to live to 94, and a female to 95.

In the Challenger and YourLifeChoices Ensuring Financial Security in Retirement Survey 2019, 91 per cent of 3380 respondents said it was either very important or important that their income in retirement was guaranteed to last as long as they did. However, only 22 per cent said they were confident they could maintain their existing lifestyle to ‘average’ life expectancy or beyond.

A lack of accurate knowledge about current life expectancy too often throws retirement income planning into disarray, says Challenger, warning that a plan that lasts only up to average life expectancy will disappoint one in two retirees.

Challenger also warns that with at best a five per cent success rate, a plan that relies on a certain age at death is almost certain to fail. It will either be too short and leave a retiree to live only on the Age Pension or it will be too long and leave a lot of unspent wealth, Challenger says.

The outlook for couples is slightly different. This is because there is an increased likelihood that one member of the couple will live longer than their combined individual life expectancies.

Increased longevity can heap real pressure on retirees’ finances.

Challenger’s chairman, retirement income Jeremy Cooper said retirees should be focused on finding ways to spend their savings safely throughout their retirement, regardless of how long they might live.

“One of the biggest risks in retirement is longevity risk, which includes the risk of outliving your savings. Not knowing how long you will live makes managing this risk difficult. 

“Today’s retirees are typically living well into their 80s – 10 years longer than they did back in 1990. A retirement plan that ensures ways to safely and steadily consume savings over a lifetime should be a priority.”

So, what is required to ensure we are not caught out?

The solution may be a technological one. Challenger reports that there are developments almost daily in the burgeoning ‘FinTech’ industry that can present the complications of life expectancies in an easy-to-understand retirement income calculator.

But even if you live to over 100, a lifetime annuity will continue to pay you every month. Try Challenger’s Guaranteed Lifetime Income Tool to find out what your monthly annuity income could be.

Are you concerned about making your money last as long as you live? Were you aware of the developments in the FinTech industry? Do you have or have you considered an annuity?

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

Related articles:
Five ways to boost retirement income
Boomers spending kids’ inheritance
What must change in retirement

Challenger is a YourLifeChoices preferred partner.


Forget more compulsory super: here are five ways to actually boost retirement incomes

Australia's retirement incomes system works well, but there are things that need fixing.

Boomers spending kids’ inheritance

Baby boomers are spending about $1 billion of their children's inheritance every year by gradually

How the government must respond to support Australia’s retirees

We asked for your help to prepare a submission to the government's retirement income review. This