The Australian Bureau of Statistics’ recently released life tables revealed Australia’s life expectancy has continued to rise, now ranking the third highest life expectancy in the world.
Based on deaths in 2019-2021, the Australian life expectancy at birth for males is now 81.3 years and for females 85.4 years. While the life tables expect women to live longer than men, the gap is narrowing. It was 4.1 years in 2019-21, down from 5.0 years in 2001-03.
Life expectancy grows with age which is important for retirement planning. While the number of expected remaining years in your life will decline, it declines slower than your increasing age. For example, the ABS life tables show that life expectancy at age 65 for males is 85.3 years and for females is 88.0 years.
Based on its provisional mortality statistics, the ABS is expecting the impact of covid-19 to have a negative effect on Australia’s life expectancy when the next results, based on 2022, are released.
Estimating your retirement planning horizon
Financially successful retirement depends in large part on managing longevity risk. If you’re going to plan to make your assets last a lifetime, you need to estimate how long that lifetime may be.
Basic life expectancy numbers such as those quoted above are handy for analysing trends and differences between groups of people. They are definitely not suitable for retirement planning. It is essential to consider mortality improvements along with gender, socio-economic and health differences at the individual level.
Underestimate a retiree’s lifespan? The retiree could outlive their savings. Overestimate it? That could mean an excessively frugal existence.
How long will you live?
Optimum Pensions has built our Lifespan Calculator to help users personalise their life expectation(s) and give an indication of the number of years their savings may need to last in retirement. Individuals and organisations can use the calculator to build confidence around personal life expectancy and a retiree’s possible retirement planning horizon.