Longevity Risk & What you can do about it


Active Senior Playing Tennis

One of the most common questions we receive when our clients are planning their retirement is – what if I run out of money? It’s not a surprising question, as it’s a scary thought and the stats back it up – one in four Australians will live beyond the average life expectancy and outlast their super savings by 10 years according to a survey released by Mercer.


This number has increased as baby boomers reach or approach retirement age and life expectancies continue to rise, the notion of longevity risk (or running out of money in retirement) has become embedded in financial and government parlance. The issue of longevity risk has been accentuated by significant investment market events, such as the recent Global Financial Crisis (GFC). Such market shocks can have a material impact on the asset value of market linked pensions, as investors continue to draw down their pension during these periods. So what can you do about it?


Most importantly, planning is key. We like to start working with clients on their retirement from 50 if not earlier. It is something everyone should be thinking about, even if at 30 it seems like a lifetime away (literally!). With the right planning, the instance of you outliving your means is much less likely, keeping you very comfortable so you can enjoy the retirement you’ve earned.


Recently, a new insurance has been released to take the majority of risk out of this situation. For example, your could invest a quarter of your $400,000 super benefit, which could return up to $10,000 per annum above the age pension after your super runs out.


It sounds enticing, but each individual is different and your personal circumstances should be considered. If you’re unsure if it’s right for you, or have a similar burning question about retirement, please call or email us today, so we can ensure you’re set up for success.