Living Your Golden Years Without Financial Worry

Written on the 18 June 2024 by Parkside InvestorPlus

Dianne has just retired from her job as an accountant after decades of loyal service.

As she bid farewell to her colleagues, the pangs of anxiety began to set in.

Would her savings and superannuation be enough to sustain her desired lifestyle throughout her retirement years?

Stories of retirees outliving their money came into her mind.

Leaving your retirement to pan out on its own is giving up control to external factors.

To avoid being another financial statistic, the best advice that can be given is to take control of your retirement finances and even engage a financial planner – don’t have the attitude ‘it’ll be ok’.

According to the Australian Bureau of Statistics, the current life expectancy for Aussies is 80.7 years for males and 85.0 for females.

With many living well into their 80s and beyond, running out of retirement savings is a legitimate concern.

Careful planning is crucial to ensure your money lasts as long as you do. 

First, it's important to get a realistic estimate of your life expectancy based on your current age, health status, and family history.

Tools like the Australian Government's MoneySmart Retirement Planner can help provide a tailored projection.

According to their data, a 65-year-old male can expect to live around 19 more years, while a 65-year-old female may live an additional 22 years. However, keep in mind these are projections based on trend rather than hard and fast milestones. 

The reality is that in 2024 and beyond, with advances in health care, medical diagnostics and preventative medical procedures, the likelihood of living beyond any statistical life expectancy tables will be longer.

Next, you'll need to calculate your annual retirement expenditures, being sure to account for potential increases in costs over time due to inflation.

Don't underestimate expenses like healthcare, which an AFR article estimated can cost healthy Australian couples over $285,000 in retirement.

With your projected longevity and annual budget in hand, you can then gauge whether your current savings and expected income streams will suffice.

The ASFA Retirement Standard suggests singles will need $545,000 and couples $640,000 in retirement savings to live a 'comfortable' lifestyle.

An often-overlooked income source is the Age Pension - despite being an entitlement, over a million Aussie retirees miss out due to improper planning.

If your existing capital and income will likely fall short, you have several options:

·       Delay retirement by a few years while continuing to build your savings

·       Adjust your lifestyle expectations and lower your annual budget

·       Explore 'income layering' strategies like a reverse mortgage to utilize home equity

·       Invest in income-generating assets like dividend stocks or rental property

·       Purchase longevity insurance products like annuities or aged care insurance

Perhaps most importantly, build in a buffer for unexpected expenses, medical needs, and the chance you may live longer than projected.

According to actuaries at the University of New South Wales, there's around a 25% chance of a 65-year-old living beyond 97.

Running out of money at that stage could be catastrophic.

With some prudent preparation and continual monitoring, you too can overcome the 'longevity risk' facing retirees today.

As Diane would soon realise, the key to retiring with peace of mind is having a sustainable, tailored plan to make your savings outlive you, not the other way around.

Remember, a little planning today can go a long way in ensuring a worry-free tomorrow.

If you’re ready for retirement and not sure of your options or if you are a retiree and wanting more positive outcomes in your retirement phase, contact us at Parkside InvestorPlus at (02) 9899 4899.