The three chapters of retirement

Today’s retirees will live longer but it’s how the three distinct ‘chapters’ of retirement are managed that will make all the difference. David Williams explains how.

The way the current generation of seniors spend their longer years will have the biggest impact on their quality of life in retirement.

Statistics released in April this year by the Australian Institute of Health and Welfare (AIHW) in its report Life Expectancy and Disability in Australia 2003-15 reveal how many years you can expect to live in one of the three recognised stages of longevity.

Those stages are:

  • disability-free – the first chapter of retirement
  • some disability but independent – the second chapter
  • dependent – the third chapter.


The table below shows the expected average number of years in each stage at 65, 75 and 85.


The AIHW study shows that disability-free years have increased for all ages and reaffirms that, on average, more remaining years will be independent.

Even those who reach 85 can, on average, expect another few years before becoming dependent. The numbers still support the view that ‘the longer you live, the longer you’re likely to live’. At 65 the average lifespan is 86. For those who reach 75, they can expect to live to 88, and at 85 the expectation is 92.

Gender differences still exist, however, and while women on average outlive men, their dependency is one to two years longer.

Putting the numbers in perspective
There are limitations on numbers like these. First, they are averages. Also, as we age, personal abilities and conditions vary more widely between people.

As medical and social responses to ageing improve, life expectancies and the time in each of the stages will change. The good news is that as we age there tend to be fewer dependent years.

The key to understanding what your financial needs will be as you get older is not so much about what your age is, but what level of dependency you have. In the first chapter of retirement – and in the absence of a costly health condition – retirees are more likely to travel or spend on their lifestyle.

During the second chapter, although still independent, health issues arise for many that mean medical costs need to be paid. But it is in the third chapter that health spending overtakes almost all other bills.

Managing the stages
You probably feel anything but average. So, how long can you expect to live as you pass through each chapter of your retirement?

Fewer than 25 per cent of 65 year olds live to within three years of the national average lifespan for their age. Worse, we know the ‘official’ averages underestimate the likely outcome between ages 60 and 80 – just when people want to manage their income as well as possible.

The first step is to take a view on whether you are likely to have a different longevity from the average. One way to do this is by using the SHAPE Analyser, a free tool. In 2008, I developed this service because efforts to plan finances and other matters rely on an assumption about each person’s timeframe.

Since the number of dependent years drops slightly with increasing age, a longer than average life expectancy will probably end with about the same number of dependent years but having had more active years.

The next step is to take a view on the possible impact of disabilities on your lifestyle. To help with this, separate possible disabilities into three groups:

  • your current disabilities – ask your medical advisers to explain how they might evolve and clarify what could minimise their impact
  • family-linked disabilities – knowing whether there were family tendencies towards disabilities or diseases that might affect you, for example, vision, hearing, mobility and mental acuity could help you factor in your own response. It would also be useful for other family members to know this
  • disabilities that might arise from your current condition and behaviour – this is an opportunity for a frank discussion with your medical advisers about what you can do to minimise preventable disabilities.


While a focus on disabilities may seem a bit morbid, the goal is to minimise their impact for as long as possible. The first rule of war is to know your enemy!

Planning ahead
Using this approach, you can develop a timeline for your remaining years. As well as summarising your current thinking, this will help you to respond better to the unexpected issues that may arise.

This kind of personal planning also enables you to contribute much more effectively to developing and committing to a financial plan. There is no plan without a timeframe and the best timeframe is the one that you develop for yourself. You can then have a constructive conversation with your financial adviser – just as you will have had with your medical adviser.

Understanding more about the chapters in your longevity is a step towards taking more control of your life and achieving a more fulfilling future.

Related articles:
Do you have enough for retirement
Busting the biggest retirement myth
How long will you live?

YourLifeChoices Writers
YourLifeChoices Writers
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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