What does longevity mean for you?
New statistics released by the Australian Institute of Health and Welfare (AIHW) show that our life expectancy is continuing to increase. Over the past 50 years, life expectancy for Australian males has increased by 13.7 years (to 81.3) and by 11.2 years for females (to 85.4). The most common age at death (between 2011-2021) was even higher, at 87 for males and 91 for females.
Do these numbers match your own lifespan expectations? They are rather daunting, aren’t they? Most of us would be happy with a long life, but assume that means a healthy and active one as well.
And if you are in the ‘most common’ cohort of 87 for males and 91 for females, how does this influence the way you go about your retirement?
Things are changing, that’s for sure. When most of us grew up, retirement was encapsulated by the cliché of a gold watch and slippers. Community understanding of retirement was that of an ending. But that ‘old school’ view has now been overtaken, with retirement now seen as a new beginning or at least a re-direction.
There are a few reasons for this. As evidenced by the AIHW updates, we are generally living longer and healthier lives. This means the number of years in retirement has increased by as much as age expectations have grown. With the current average retirement age of 55, and most Australians living to 85+, there are 30 years – a third of our lives, and nearly half of our adult lives – which will most likely be spent away from the workplace.
There are very different generational aspirations of what ‘life after full-time work’ might mean. These aspirations are now often linked to new ventures and adventures, including new relationships, new work, new business opportunities and new communities. Retreating to the loungeroom in the long-held family home doesn’t seem that interesting, if it ever did.
The result of more years in retirement means that the previously sharp divide between full-time work and total retirement has become increasingly flexible. Many will stop work, take a break, then restart in another role, which might be full time, part time or casual. Currently there are skills shortages in most industries, so older Australian workers are actually wanted for a change, rather than seen as taking jobs from younger people.
Rules around income have changed also, with ‘Transition To Retirement’ strategies and a more generous Work Bonus evidence of successive Commonwealth governments’ desire to keep older Australians working longer.
All of the above shifts in sentiment seem positive. And that retirees are now in the driving seat, in control of their futures. But when Retirement Essentials surveys our members about how they feel about retirement, it’s the same old topic of managing income throughout an increased life span that comes up. In a nutshell, the two top concerns haven’t changed at all over the past few years. These are:
- How much is enough in savings to ensure I cover my expected longevity? and
- Will my money last?
Perhaps, you, too are worried about these aspects of your income. One of our Retirement Healthchecks can help with your planning. In addition we have put together a three-step plan that addresses these concerns and hopefully sets your mind at rest.
So read on to see how to better understand longevity through the context, how to create clarification and to identify a practical long-term vision to help you enjoy your bonus years.
Step 1: Define the context
Numbers matter. So does your place relative to others in retirement. The most useful starting point to help smooth your income management is to have as accurate an idea as possible of your expected longevity. There are many calculators available to work this through. Some are simple, others take more factors into account. We are launching our own in the next few weeks so stay tuned for that.
Step 2: Take your own retirement pulse
The second step is to get more clarification about how long you can reasonably expect your current savings and any work income to support you. Part of this clarification is to tackle the notion of ‘running out’. In Australia the safety net of the Age Pension means that all older Australians should have at least this fortnightly income, for as long as they live. Additionally, it is inflation-adjusted, so your benefits are designed to keep in touch with basic wages and consumer price increases. You can check your Age Pension entitlements here.
Most people entering retirement will also have some super savings. These savings, from Preservation Age onwards, can be drawn down to supplement other entitlements and income, or as an income stream on their own. The Retirement Essentials Retirement Forecaster has been designed to help you project how your super can, or will, combine with an Age Pension and other savings to create an ongoing income. For 80% of Australians, the Age Pension will become a source of retirement funding at some stage. Knowing this buffer is available, and exactly when it will kick in, will help you plan your spending more accurately. For many of our members, this has meant the ability to spend a little more earlier in their retirements, knowing that they will not, literally, ever run out.
Step 3: Adopt a long-term vision
There are always different ways of thinking about things. Back in the 80s Edward de Bono taught us all about the different thinking hats (yellow for optimism, red for emotions , blue for process and so on). This offers a good mental picture to bear in mind when we consider our own mortality. Now’s the time to don the ‘longevity’ hat to ensure that you futureproof yourself as much as possible.
Don’t assume age care conversations are only for the frail old. They are not. Remember what seems like minutes ago you were 25 and had the world at your feet? Back then you couldn’t even begin to imagine turning 50 or 60. Well now that’s happened, let’s look further down the track, while you have the energy and capacity to make your own best decisions.
Future thinking is necessary in the realms of home, community, purpose and health. Thinking about where you live now and how sustainable and suitable it is for 20 years’ time is important. So too is your neighbourhood and access to services that may become more necessary as we age. Maintaining purpose and connection are, of course, important. Noticing if we are becoming more isolated is necessary if we are to prevent this. There are other later life matters that can be considered now, too. These include legal instructions, including wills, powers of attorney and other contracts.
But the most important longer-term thinking is less complex and can start today. And that’s a commitment to put your health first. All the planning in the world will count for nothing if you aren’t active enough to fully enjoy your later years. There are plenty of ways to audit your health and to set in place practices that mean you can age well, in comfort, in the place of your choice.
As they say in Greece, home of the Mediterranean longevity, makrozoía, or ‘long life’ to you!
Comparing different income and spending scenarios during a guided consultation is a smart way to see how your savings and super will support you as you age. Enjoy our Retirement Forecasting to see how your assets and income will look during your retirement journey. You can also undertake a Retirement Heathcheck with one of our advisers to help you with your planning.
Do you have any tips?
How are you managing your own longevity?
And tips for our other members who are concerned about financial longevity as well?