The risk of financial advisers using the Australian life tables (ALT) to help clients prepare for retirement will lead to Australians facing ongoing challenges as they increasingly outlive their life expectations provided by static tables - ultimately leading to under-funding in retirement.
When you retire your salary stops and hopefully an adequate pension starts. But the costs of living keep increasing. You don't go off to work every day and no employer or customer puts money in your bank account every month to pay the bills. You need a new way to cover your expenses for 20 to 40 years - depending on how long you want your retirement to last.
One source of income is via Centrelink's Age Pension, which does the heavy lifting for many retirees by providing an inflation linked lifetime income that lasts for life, no matter how long they live. Many Australians rely on the Age Pension to support them throughout their retirement years and it provides reliable regular income rather than a lump sum they must manage themselves. The Age Pension has just increased to $35,916 per annum for a couple and for singles the annual amount is $23,824. These rates apply if assets and income are below Centrelink's means testing bands.
However, anyone whose assets are above their relevant means testing thresholds or those whose lifestyle costs are more than the Age Pension must structure their own savings (e.g. superannuation and investments) to top up their regular income and meet these costs for the rest of their life.
So how can retirees secure a good income from their own assets for their entire future lifespan - no matter how long they live for?
This white paper will help financial planners and advisers clarify the post-retirement options individuals currently have to choose from and why new ways of assessing these options and calculating longevity is crucial to help them add value for their clients. It will discuss the additional steps the financial planning community needs to take to build viable post-retirement income plans as Australia's population continues to outlive traditional longevity benchmarks.