Why retirement risks keep rising

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Whether you are on the cusp of retirement or have already retired, assessing your potential risks in retirement should be a significant part of your retirement planning.

Research conducted by YourLifeChoices shows that almost 80 per cent of retirees are worried that they will outlive their savings, and members articulated those fears in last year’s Retirement Affordability Index.

While this is the No.1 risk according to YourLifeChoices’ members, the other side of the coin is the mortality risk (having a shorter life than expected, which is thankfully in decline) often leaving a surviving spouse or partner to manage personal and financial affairs.

Other retirement risks facing retirees are health risks, market risks, event risks, and tax and policy risks. Here’s our breakdown of the risk factors affecting retirement.

Longevity risk
According to the latest figures from the Australian Bureau of Statistics (ABS), male life expectancy has increased 1.5 years over the past decade and is now the highest on record.

Australian men born today have a life expectancy of 80.5 years compared with 84.6 per cent for females.

“Australian males can now expect to live 10.8 years longer than the world average of 69.7 years, according to the United Nations 2015–2020 estimates,” ABS demography director Anthony Grubb said.

“Female life expectancy remained the same as the previous year (84.6 years) and compares to the global average of 74.3 years.

“Australians have a higher life expectancy than our counterparts in New Zealand, the United Kingdom and the USA.”

While Australians living longer should be good news, it does mean that the risk of outliving your money in retirement will increase.

Health risks
These include both the risks of falling ill and the risk of being unable to afford adequate health, health insurance and aged care. All of these costs are increasing, particularly the cost of private health insurance.

In a recent Friday Flash Poll, a huge majority of YourLifeChoices members said they were paying too much for private health cover and getting very little in return, with 75 per cent of those who have had to use their private insurance discovering it was not enough to cover medical gap fees.

The Friday Flash Poll: What’s your take on private health cover? revealed that 85 per cent of the 1121 respondents have private health insurance, with 81 per cent saying they pay too much for cover – only six per cent saying they pay what they think is fair.

Health insurance premium rises have outstripped CPI for the last five years. Since 2013, the average yearly premium hike was just over five per cent. Since 2013, annual CPI increases have averaged just under two per cent.

This is one of the reasons that health risks are one of the fastest growing risk areas for a comfortable retirement.

Market risks
The components of market risk for retirees include poor investment returns that affect retirement lifestyles, inflation that erodes savings, interest rate movements that adversely affect savings, and overreaction to market volatility. 

Event risks
This is the risk that large unexpected expenses – such as unavoidable home repairs – may have a significant impact on a retiree’s savings. Such costs can disrupt a carefully-constructed retirement plan.

Tax and policy risks
With an election on the horizon, the potential for changes to retirement income streams seems almost certain. Already there have been some massive changes to Australia’s superannuation system in the last five years and there are plenty more coming regardless of who wins the election. It can be difficult to plan for these changes, but these are some of the things that need to be taken into account at retirement.

What do you think is the single biggest threat to living comfortably in retirement?

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Written by Ben

27 Comments

Total Comments: 27
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    Keep it simple. Income – full age pension. Still have a mortgage. No super. Still manage to get by but its getting harder. But at least I know how much I have to work with. Full hospital cover would cost me almost $200 a month – not enough discretionary income left after housing and living costs. So public system it is. It could be worse. I could be living in Syria, or the US.

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      The single biggest threat is the Politicians continually receiving exorbitant pensions after retiring and all the other perks and benefits they receive !!

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      Syria was okay before the civil war and of course it’s awful now. I don’t understand your comments about the US though. They have a universal aged pension and medical benefits over 65. The cost of living is far lower than in Australia as well. Many medications are available over the counter at far cheaper prices than in Australia as well.

      In my case working for 43 years I would not be disadvantaged because i saved if in the US. I’d happily live in the US. It’s a beautiful country with good people.

      Have you lived there or just read stories or believe the TV shows are real?

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      I’ve lived there. I hate the food! Couldn’t buy a lot of my favourites – even some vegetables. Other than that, great, depending where you are. I love New Orleans, but it gets horridly hot and humid there.

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      Agree with johnp & Patti, living costs are a risk as they increase while income seems to decrease or stagnate! Challenging to say the least! I also do not have health insurance (or many other things) for these reasons or savings (cash/money in bank) as still paying for mortgage. Do have some super but I worry about the risk of losing that to greedy politicians, etc before I’m allowed to access it, they constantly trying to change the goal posts & or trying to raid it for other things or allow banks to manage it without our consent/permission etc. Super has been good in some respects (forced savings for retirement), however it is also a forced way of allowing other greedy parties to access a wealthy lifestyle at our expense (seems everyone wants to get their hands on as much of it as they can). Yes we have the choice of not paying salary sacrifice but paying it to taxman is the alternative so “forced” into a choice to line their pockets

  2. 0
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    The single biggest threat to living comfortably in retirement is the Politicians continually changing the goal post for same.
    There should be a Universal Pension paid to everybody.
    All superannuation should be saved in the Future Fund, the same that Politicians use.

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    The Federal Government should in my review, go back to basics, when it comes to welfare payments. I do not agree with the Old Aged Pension being classified as ‘Welfare’ as it is essentially a force superannuation. incorporated within tax payments people paid throughout our working life. However, it is obvious the Federal Government needs to review welfare payments which essentially should only go to those with a serious disability and cannot perform any form of employment, and a temporary dole payment lasting not more than two years, before being placed into employment. Payments for refugees should also be a temporary payment, lasting two years maximum and should not include free housing. There should be no payments for pregnancy or child care and the like. Our country can no longer hand out money at its current rate. We simply do not have the money to do so. So get back to basics. My parents did not get all these entitlements handed out by the Government, and we children survived and did very well thank you. This new generation of ‘entitlement’ will not agree with me of course. But this new generation have to grow up and fend for themselves and stop demanding handouts from their parents and the government.

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      I forgot to add. This is the only way the Government can increase the Old Age Pension to a more reasonable amount to allow older Australians to enjoy their retirement, without worrying about their survival each and every day.

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      Yes the majority of people did pay taxes but that only covered schools ,hospitals,,roads ,prisons ,DOLE,education,,nothing there for pensions….Few countries in the world had a pension scheme,,,,China is paying for our pensions currently ,,,God bless China

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      Yes the majority of people did pay taxes but that only covered schools ,hospitals,,roads ,prisons ,DOLE,education,,nothing there for pensions….Few countries in the world had a pension scheme,,,,China is paying for our pensions currently ,,,God bless China

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      @CoogeeGuy … whose employment do you place people into after two years unemployed?

  4. 0
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    I have a general comment regarding reading yourlifechoices articles : Waiting for the ads at the top and right of the page to be served seems to take an inordinate amount of time. However, if you try to start scrolling to read thearticle before they have arrived it screws up the page (too farup, toofar down, jumping up and down etc.

    Why do the adservers take so long to load thads (10-15s minimum)?

    And then you have to close the rectangular box ads (such as the pension checker, travel ads etc).

    Is anyone else annoyed by these features ?

  5. 0
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    I have a general comment regarding reading yourlifechoices articles : Waiting for the ads at the top and right of the page to be served seems to take an inordinate amount of time. However, if you try to start scrolling to read thearticle before they have arrived it screws up the page (too farup, toofar down, jumping up and down etc.

    Why do the adservers take so long to load thads (10-15s minimum)?

    And then you have to close the rectangular box ads (such as the pension checker, travel ads etc).

    Is anyone else annoyed by these features ?

    • 0
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      What annoys me is the long drawn out screen to screen process that seems endless on some articles. Is it because each new click/new page gets advertising dollars or are they just hoping you’ll give up before the end. I always give up as my patience is very limited for this sort of thing.

    • 0
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      I suggest you download a free blocker those are available for all browsers Chrome, Firefox, Explorer etc etc this are the sites …. but check and read first to be sure your machine can handle the software…These software blocks all adds and pop ups I have been using them for a long time and get no adds at all on my PC ….
      First do a search for Add blocker ultimate and select the download for the browser you are using

      This site will explain all …. https://adblock-chrome.en.softonic.com/
      and this youtuve
      https://www.youtube.com/watch?v=1cY3SDb47SM

      This is a suggestion only maybe need to have a chat with you PC support person to ensure is all ok to do.

      Hope this help to avoid all those add’s

  6. 0
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    I’d say event risks whether that is an unforeseen illness, or unforeseen and expensive repairs to the house, or car. Without a small nest egg these can derail retirement plans

  7. 0
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    Speaking of derailing of retirement plans. I do not think anyone has considered how a pensioner on the old aged pension is going to be able afford to pay their BODY CORPORATE fees which avarage $1700 a quarter and above in Sydney. Apartment living is becoming the norm now, yet I never read anything about this impending disaster

  8. 0
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    We have a federal, lots of state governments city governments and all for a piddling little population,,,Plane loads of politicians fly over from WA and fly back at the end of the week.then we have all the public servants.. The Queen of Queensland has put on 27,000 extra in her time…all with massive super and extras
    One cabinet minister in Keating’s government I know [only 45 yrs old at the time]has been living on that pension all these years I despair

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      Bill O’Chee retired from the Senate two decades ago while still in his mid-30s, walking away with an indexed pension for life of about $50,000 a year.

      Natasha Stott Despoja retired in her 30s a decade ago, after 13 years in the senate, on a lifetime pension of almost $80,000 a year as well as generous “severance” entitlements.

  9. 0
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    We have a federal, lots of state governments city governments and all for a piddling little population,,,Plane loads of politicians fly over from WA and fly back at the end of the week.then we have all the public servants.. The Queen of Queensland has put on 27,000 extra in her time…all with massive super and extras
    One cabinet minister in Keating’s government I know [only 45 yrs old at the time]has been living on that pension all these years I despair

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      “Plane loads of politicians fly over from WA and fly back at the end of the week” … really?What size plan are you talking about? There are only 28 federal members for WA and not each of these return home at the end of each of the 20 or so sitting weeks, which sometimes occur two weeks at a time. Your hyperbole diminishes the otherwise good point you raise about excessive representation for our 25 million or so population.

  10. 0
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    YLC “Australian men born today have a life expectancy of 80.5 years compared with 84.6 per cent for females.” … how old is 84.6 per cent? Proof-reading and editing are sadly limited skills these days.


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