How increased life expectancies impact retirement savings

Thanks to improvements in medicine and technology, Australian life expectancies are at record highs. On the flipside, this has a huge impact on our retirement savings; one of the biggest being that there’s a real risk we’ll outlive our savings.

We’re living longer than ever

Life expectancies of Australians has been steadily increasing to our highest-ever levels.

Currently, a 65-year-old man has a life expectancy of around 19 years, and a female of the same age has a life expectancy of around 22 years.

Australians' life expectancies

That’s over a quarter of our lives spent in retirement! It’s a sobering thought when you think about how much you will need to fund your retirement coupled with the fact that you won’t be earning a wage anymore.

We’re at risk of outliving our savings

Despite having one of the best superannuation schemes in the world, research has shown that there’s a gap for many and savings don’t keep pace with longevity, which means some retirees run out of money.

It’s reported that 1 in 4 Australians are expected to outlive their savings by more than 10 years, with a retirement savings shortfall of around $187,200* per person. While Maritime Super members retire with a higher account balance than the super industry average, it’s still important to bear this in mind and do your own sums.

Retirement savings

* Source: Rice Warner, June 2014: Retirement Savings Gap as at 30 June 2014.

So how far will your retirement savings go?

Increasing longevity means that higher levels of savings are required to support us in retirement.

To work out whether you’ll have enough, a good place to start is our Pension Drawdown calculator, which can give you an idea of how long your retirement savings could last. 

Once you’ve worked out how long your money is projected to last, you can take steps to reduce your retirement savings shortfall. 

Taking a closer look at your investment strategy

Something often overlooked is the fact that your money needs to continue to work for you in retirement. While it’s understandable that you may have less of an appetite for risk once you’ve retired, it’s imperative that your money continues to deliver investment growth. 

Here’s why it’s so important that your pension is invested strategically for you: as general rule of thumb+, research shows that your retirement income is made up of 10% contributions made during your working years, 30% investment earnings before retirement and 60% from investment earnings in retirement. 

So make sure that you’re invested in such a way that you continue to receive reasonable investment growth – if you’re unsure about your investment strategy, our financial planners are here to help you.

+ Russell Investments 10/30/60 Retirement Rule is based on a balanced-style portfolio made up of approximately 65% shares and 35% bonds, and assumes contributions made from age 25 to 65, with 25 years in retirement.

Taking steps towards retirement adequacy

If you’re worried that your money won’t go the distance, the best thing you can do is get some financial advice. Our financial planners can help you work out whether you’ll have enough for a comfortable retirement, as well as giving you strategies designed to make your money last so that your retirement is a worry-free one. 

Meet with a financial planner to get advice on:

  • transition to retirement strategies
  • investing your pension
  • budgeting in retirement
  • tax minimisation strategies
  • Age Pension and other social security entitlements

Call Member Services on 1800 757 607 to make an appointment with one of our planners.

 

Disclaimer:
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.
 

 
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