Retirement planning and longevity risk

Written and accurate as at: 9 December 2021

When it comes to the retirement life stage, there are several risks retirees specifically face. Understanding these risks, and having a retirement plan in place, can help you weather these obstacles.

Some of these risks can include, legislative, investment and sequencing. Though probably one of the greatest retirement-specific risks is longevity—the potential to run out of money in your retirement savings (eg investments inside and outside of super) by living longer than you had expected.

As background, in Australia*, a 65-year-old male could expect to live for 20 more years (to 85) and a female 22.7 more years (to 87.7). However, when considering your life expectancy, certain factors such as lifestyle choices, health status and genetics may increase your longevity, meaning your retirement savings may need to last longer too.

In this animation, we illustrate longevity risk, inclusive of several considerations with regard to managing it.

*Australian Government, Australian Institute of Health and Welfare (2021). Deaths in Australia.