Australians are living longer than ever thanks to medical advances, healthier lifestyles, and better living standards. While this is something to celebrate, it also raises an important question—how do you make sure your money lasts as long as you do?
What does longevity risk mean?
Longevity risk is the possibility of outliving your retirement savings. Living into your 80s, 90s, or beyond is increasingly common, and while that gives you more years to enjoy life, it also makes careful financial planning essential. Relying solely on the Age Pension is unlikely to provide the level of comfort most retirees want, so managing this risk is key to maintaining financial independence.
Surveys show that many older Australians feel the pinch of rising living costs, with a significant portion admitting it has impacted their financial stability. This highlights why it’s important to prepare for a retirement that could last several decades.
Steps to protect yourself from longevity risk
1. Estimate how long your savings might last
Your health, lifestyle, and family history can all influence life expectancy. Having an idea of how long you may need your money to stretch helps you plan realistically. Budgeting tools and retirement calculators can provide useful estimates and highlight potential gaps.
2. Diversify your income sources
Superannuation is often the backbone of retirement funding, but it may not be enough on its own. Other income streams—such as the Age Pension, investments, or a lifetime annuity—can provide additional support. A lifetime annuity, for example, offers guaranteed payments for life, reducing the worry of running out of money. Combining different sources creates stability and helps balance flexibility with security.
3. Make use of planning tools and advice
Creating a retirement budget is a practical way to track expenses and set spending limits. Understanding how the Age Pension works, including eligibility and benefits, can also help you plan. For tailored support, speaking with a financial adviser or accessing free government resources can give you clarity and confidence in your decisions.
Why financial security matters
Having reliable income throughout retirement does more than just pay the bills—it gives you freedom. With financial stability, you can focus on the things that matter most, like travelling, pursuing hobbies, or spending time with loved ones. Research consistently shows that retirees who feel confident about their finances are more likely to enjoy happier and more fulfilling lives.
The key to a confident retirement
A long and healthy life is something to look forward to, but it requires thoughtful planning to make sure your savings go the distance. By understanding longevity risk and putting strategies in place early, you’ll be better positioned to enjoy retirement without the constant worry of running out of money.
