Shaun Bransdon
TAL actuaries specialising in retirement have done a deep dive into Australian life expectancy data – uncovering the truth about 5 commonly held life expectancy myths (“the age my parents or grandparents died is a good predictor of how long I’ll live”, etc.) Their analysis of “longevity risk” can help superannuation funds, banks, and financial advisers provide the right guidance, products and support so Australians can plan for their future.
Helping Australians retire with confidence
Shaun Bransdon, Head of Retirement & Wealth at TAL, said financial stress is one of the main concerns among older Australians.
“Retirement should feel secure, not stressful. But many older Australians are worried about their financial future.”
“TAL research shows that more than 1 in 3 Australians (38%) aged 55 or over are unsure they’ll have enough savings for a comfortable retirement. Among those who have already retired, a top concern is that their super might not last as long as they do.”
“Part of the challenge? It’s hard to know how long retirement will last. TAL research shows that nearly half of pre-retirees underestimate how long they’re likely to live. At the same time, a third of current retirees now expect to live longer than they originally thought.”
“When Australians gain a clearer understanding of their life expectancy, they can make more confident and balanced decisions, not just for the early years of retirement, but for the long haul.”
“With 2.5 million Australians set to retire in the next decade, advisers have a key role helping clients feel prepared and in control. We have developed a short guide, ‘How long does retirement last?’, highlighting the key myths that lead clients to underestimate how long they will live and to support advisers discuss with clients why planning for a longer retirement is important.”
“ Lifetime income solutions can also help clients feel confident and in control in retirement, they offer a steady income stream for life, protecting against the risk of outliving savings. They help smooth income over time, even if clients draw more in their early, more active years.”
“These solutions work alongside account-based pensions and the Age Pension to help manage cash flow and create peace of mind. Importantly, they’re flexible. Features like spouse protection, withdrawal options and death benefits mean they can be tailored to meet an individual’s needs.”
Life expectancy myths and realities
Our analysis uncovered the following about five commonly held myths around life expectancy.
Myth 1: ‘Life expectancy from birth’ statistics are relevant for older Australians
The reality: As we get older, our life expectancy increases. This is because life expectancy statistics consider all the deaths likely to occur from infancy, childhood and throughout adulthood, skewing the average downward. So, while children born today have an average life expectancy of 81 for boys and 85 for girls, this will increase as they move through life.
For today’s 65-year-olds, this equates to average life expectancies of 85 years for men and 88 for women. Moreover, as this group moves through retirement, they’ll continue to benefit from improved living standards, medical advancements and healthcare improvements. Based on recent trends, this is likely to further increase their average life expectancy to age 88 for men and 90 for women.
Myth 2: I only need my retirement savings to last until my life expectancy
The reality: Life expectancy statistics are based on averages. In any cohort, some people will die sooner and others will live much longer. When we factor in expected lifestyle improvements, the probability of a 65-year-old today living beyond age 95 is 20% for men and 29% for women. So, planning only for the average life expectancy could leave retirees financially vulnerable in their later years.
Myth 3: Planning for retirement as a couple simply means calculating each partner’s life expectancy
The reality: Many couples assume they’ll live until roughly the same age. But for today’s 65-year-old couples, there’s a 24% chance that one partner will survive the other by at least 15 years. Couples need to plan for the longer-living partner, to ensure their savings will last the distance.
Myth 4: The age my parents or grandparents died is a good predictor of how long I’ll live
The reality: While genetics do play a role, family history doesn’t necessarily predict the future. For 65-year-olds in the 1960s, the average life expectancy was age 78 for men and 81 for women. Two generations later – when we factor in the lifestyle improvements mentioned above – these averages have increased by around 9 years for both sexes.
Myth 5: I’m fairly typical, so the population statistics are relevant for me
The reality: Statistical averages don’t help us define the ‘average’ Australian. We all have unique health and lifestyle characteristics that influence our life expectancy. Socio-economic factors – like our income, occupation and even where we live – can create a disparity. For today’s 65-year-olds, this gap is around three or four years between the most and least disadvantaged.
With 2.5 million Australians expected to retire within the next decade, it’s imperative they’re well-equipped for the realities of life after work. Data like this can help make conversations about planning for the long term easier. It can help super funds and financial advisers confidently navigate these discussions with members, leading to more informed decisions and better retirement outcomes.
