If you knew when you were going to die, you would carefully consider what you want out of your remaining years, activate your bucket list, and set about making those dreams possible.
As a priority, you will need to make sure you have the funds you need to cushion the level of comfort you desire in retirement and still have money left to visit with family and friends, donate to charity, climb mountains, and cross off the other top things on your list.
Even if you could calculate the income you would need to last you for life – it would plan for the duration of your actual lifespan, compared to your life expectancy as in the bar graph below.
Are you ready for a 100-year life?
Your assumed lifespan impacts the retirement you can afford. If you knew that you would live for a shorter period than your life expectation, you could sit back and enjoy a higher income, with more money on hand to live a comfortable retirement without risk or worry. Yes, it is no doubt better to die early!
However, The Australian Bureau of Statistics reports that longevity is trending up and estimates there will be 50,000 centenarians in Australia by 2050. Living for longer than your life expectation means you will need to tighten your belt and adjust your lifestyle for a lower income for longer (which may even entitle you to more Age Pension).
The more your actual period of future life differs from your life expectancy – the greater the variation in income, so it is essential to estimate your lifespan as accurately as possible when planning for retirement.
Have you seen our lifespan calculator? It is the most accurate tool available to estimate your longevity and how long you could need your retirement income to last. Try it now >>
So many considerations…
Of course, deciding the rate you burn through your income in retirement assumes that you don’t want to leave your super to your children, pets (!) or charities – as if you do, you should reduce your income further.
Dependents might receive any other non-super assets and should have the ability to live a better lifestyle than you due to the increases in real living standards over the period since they were born. Do you intend to leave them more money than your parents left you?
So many things to consider. You might begin by asking yourself, “What is the greatest risk to your lifestyle in retirement?” Usually this list will include declining health, loss of a partner, fluctuating investment returns, inflation and longevity – depending on when you want/plan/expect to die.
In the end, death is random
Only 3% of people die at the age of their life expectation. Rather than living with uncertainty when budgeting your retirement income, ‘longevity insurance’ can be in the form of a regular annuity income that increases over time and is payable to you and your partner for the rest of your lives.
Personally, I plan to live for a very long time
I prioritise my physical and mental health and expect to live well past my life expectation, as indicated by the Australian Life Tables. Considering workers will have longer life expectations, I am also keeping busy working and focusing on projects and causes I am passionate about. I am actively involved in my ever-growing brood of grandchildren, and together we are proud of our impact investment legacy we are growing for the next generation.
After many years of working to help Australians lead a comfortable retirement, I genuinely believe that sustainable retirement incomes are essential to provide better lifestyles and greater peace of mind in retirement; no matter how long someone lives.
I am proud to be putting my money where my mouth is and finally able to purchase an investment-linked lifetime annuity. Personally assured by CEO Grant Hackett to be the first customer in line for the Generation Life Lifetime Pension to be launched later this year, I look forward to all Australians having the opportunity to live their best retirement.
> More information about the Generation Life Lifetime Anuity partnership