Surprise! How long your nest egg needs to last

If you want to know how long your money should last in retirement, base it on age 100.

This may sound far-fetched, but a new research note by the Actuaries Institute suggests that rapidly increasing lifespans mean that 100 should be the target for new retirees.

Current life expectancy tables used by many financial planners use 87 for women, but the Actuaries Institute says people also should consider "how much this will increase between now and the time someone retiring today reaches their 80s or 90s".

"A healthy, well-educated female entering retirement today, who had an affluent career and enjoys a good quality of housing, is just as likely to live beyond age 100 as she is to die before age 80," it says.

Retirees are more active than ever and living longer.
Retirees are more active than ever and living longer.

Actuary Jim Hennington, author of the research note and a member of the Actuaries Institute Retirement Incomes Working Group, said there was uncertainty about how long today's retirees would live.

"Everyone wants to make sure their savings last," he said.

"Fifty per cent of us live longer than our life expectancy. Some live all the way to age 105 and beyond.

"A couple of average health aged 65 and 62 need a plan that lasts until the male is 100 in order that they can be 80 per cent sure their financial plan meets their potential lifespan."

Planning for Prosperity adviser Bob Budreika said there was a high chance of one member of a couple reaching age 90, so that was the age his firm often modelled retirement projections on.

"When you say 100 to people they laugh and say 'nobody in my family has reached that'," he said.

Mr Budreika there were generally three phases of retirement: an initial active period often lasting 10-15 years, following by a period of staying closer to home, and finally "just existence" near the end of life.

Planning for Prosperity senior financial adviser Bob Budreika
Planning for Prosperity senior financial adviser Bob Budreika

For those without the cash reserves to last to 100 there are options, including the age pension and other government assistance, while people with property can access reverse mortgages or the Federal Government's Pension Loans Scheme.

"It's not all doom and gloom," Mr Budreika said.

Meanwhile, separate retirement research by asset management firm Franklin Templeton has found less than a quarter of retirees are working with a financial adviser.

This is way below Canada (57 per cent) and the US (47 per cent) and the research also found one in three Australians had no strategy about spending their retirement savings.

This "flying solo" approach could come at a cost, said Franklin Templeton's head of retail in Australia, Manuel Damianakis.

"Eighty-one per cent of those retired have never developed a written retirement income plan and only 43 per cent told us they have a strategy to generate income for retirement that could last 30 years or more," he said.

@keanemoney

Actuary Jim Hennington says half of us will beat our life expectancy. Picture: Matt Thompson
Actuary Jim Hennington says half of us will beat our life expectancy. Picture: Matt Thompson


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