Why Average Life Expectancy Is the Wrong Number to Plan Around

THE LONGEVITY CONVERSATION|Video 1 of 9

Picture wading into a river with an average depth of 50 centimetres. Sounds safe, until you find the two-metre hole in the middle. Life expectancy works the same way: it’s an average outcome across a population, not a forecast for any individual client.

According to the Government Actuary’s life tables for the Australian population, a 65-year-old man has a 75% chance of living to 83, a 50% chance of reaching 89, and a 25% chance of making it to 94. For a 65-year-old woman, the equivalent ages are 85, 91 and 96. For couples, it’s more striking still: there’s a 75% chance one partner reaches 90, and a 25% chance one reaches 98. Couples get two chances at beating the average.

That means roughly a quarter of clients, and more couples than that, will live well beyond the age most retirement plans are built around. The real question isn’t “how long will my money need to last?” It’s “how confident do you want to be that your money lasts?” That’s the conversation worth having before locking in a strategy.

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Video 2: Period vs Cohort Life Expectancy

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The Optimum Pensions innovative retirement income solutions are specifically developed to address longevity risk and provide greater peace of mind for all retirees; no matter how long they live. The Optimum Pensions, award-winning LifeSpan Calculator builds confidence around personal life expectancy and retirees’ possible retirement planning horizon.