How long does retirement last?
Financial Literacy -
With 2.5 million Australians approaching retirement in the next decade (ATO, 2023), it’s important that they’re well equipped for the realities of life after work. But one of the biggest challenges for members is knowing how long their money needs to last.
To help our partners and their members navigate this challenge, TAL has published a new paper – How long does retirement last? – which debunks some of the common misconceptions around life expectancy.
Understanding the challenges
According to Shaun Bransdon, TAL’s General Manager of Retirement & Wealth, financial stress is one of the main concerns among older Australians.
“Our previous research shows that 38% of pre-retirees aged 55 or over don’t think they’ll have enough money to fund a comfortable retirement,” he said. “Among those who have already retired, one of their top fears is that their superannuation will run out during their lifetime.”
To add to these concerns, it’s difficult for members to know how long their retirement savings will need to last. Among pre-retirees, 45% underestimate how long the average retiree is likely to live, while 34% of retirees now expect to live longer than when they first retired.
“Our testing shows that members who have a better understanding of their life expectancy are able to plan more effectively for their retirement overall, rather than just focusing on their needs for their early years of retirement,” Shaun said.
Unpacking the myths
The first step for understanding someone’s own life expectancy is to understand the average life expectancy for their population group. For Australians currently aged 65, this is age 85 for men and age 88 for women.
But it’s also important to remember that life expectancy statistics are based on a specific point of time. Improvements in living standards and advancements in medical technology and healthcare are likely to have a positive impact on a 65-year-old member’s lifespan as they move through retirement.
“These types of improvements have contributed to a significant increase in average life expectancies over the last two generations, which is why someone’s family history isn’t necessary a good indicator of how long they themselves might live,” said Shaun. “At an individual level, a person’s health and lifestyle – and even factors like their wealth, their occupation and their level of education – can also greatly influence their life expectancy.”
If the upward trend continues based on expected lifestyle improvements, the average life expectancy for today’s 65-year-olds is actually 88 for men and 90 for women. But relying on these figures alone can cause people to underestimate their financial needs in retirement.
Shaun commented: “These figures are only averages, so around half the population is likely to live longer. In fact, 29% of 65-year-old women could live beyond age 95, and 20% of 65-year-old men could do the same.”
How retirement income solutions can help
In recent years, TAL has been investing in our capabilities to design product solutions that can help members retire with confidence.
Our core solution is lifetime income insurance, which enables super funds to provide a lifetime income stream to their retiree members. The income stream operates alongside the member’s account-based pension and continues for as long as they live – even after their super balance is depleted.
This approach offers members the flexibility and certainty of an income for life, which can help take the guesswork out of retirement planning.
“Understanding life expectancy plays a key role in helping us design sustainable products that deliver better financial outcomes for older Australians,” Shaun said.
“Building this awareness across the whole financial services value chain can also help us assess and demonstrate the value of different services and experiences that will support members throughout the various phases of their retirement.”
For more information, download TAL’s How long does retirement last? paper and What I Wish I Knew About Retirement paper from Group HQ.
Data Sources:
1 TAL, What I wish I knew about retirement whitepaper, 2024. Based on quantitative survey of 442 pre-retirees and 558 retirees aged 55 or older.
2 Australian Government Actuary, Australian life tables 2020-2022, December 2024.
3 Australian Centre for Population, Sub-group mortality: A microdata approach to resident sub-group life tables, December 2021.