Australians – Some of the longest ‘Livers’ in the World!

Australians continue to enjoy one of the longest life expectancies in the world and are due to increase further in the next 40 years as per the table below.

Did you know? Australians rank equal first with Iceland in male life expectancy and only behind Japan, Spain, France and Italy in female life expectancy. The 2015 Intergenerational Report produced by the Australian government shows that Australians are going to live longer, work longer and be more reliant on their superannuation benefits to fund their retirement. Longevity and an ageing population will continue to add pressure on Government funding of the Age Pension and other Centrelink entitlements.

LifeTable A key proposed policy change to help improve Australia’s “balance sheet” is to raise the eligibility age for the Age Pension to 70 by 2035 (for those born on or after 1 January 1966). If this lift in eligibility age is legislated, those who plan to cease working at age 65 for example, may need to review and adjust their retirement plans. An example of this is as follows:

A married couple, both 65 years of age, plan to retire now. They currently have the following assets:

$500,000 – Super Assets
$10,000 – Other personal assets (Non Deemed)
$20,000 – Cash at bank

The couple require an amount of $50,000 per annum in retirement, up to the age of 91 years. This annual income can be met by drawing a minimum pension of 5% or $25,000 from their Super Assets of $500,000 and a part Age Pension benefit of approximately $25,000 per annum.
If however, they were not entitled to receive the Age Pension until attaining Age 70 (instead of 65), they would only achieve their required $50,000 per annum until age 83, eight years earlier than if they were entitled to the Age Pension at age 65. To maintain capital longevity until age 91, the couple would need to start with a higher amount in Super Assets, being $624,000 (equating to 24% more than what they originally had) to commence retirement Pensions or they would need to reduce their expenditure from $50,000 per annum down to $45,000+- per annum.
So, what does all this mean for your retirement planning?
Ask yourself the following questions:

  • Do your retirement plans factor in longer than average life expectancy?
  • When do you plan to retire? Is this based on when you are eligible to receive the government Age Pension or is it a Lifestyle Decision?
  • Will you be able to meet your essential cost of living if you outlive your retirement savings and become solely reliant on the Age Pension?
  • Have you factored in Aged Care Expenses during the latter part of retirement?

We can assist you to answer these queries and plan for your future golden years.