How long will my retirement last?

The burning question for anyone planning their retirement is: How much money will I need?

While everyone's lifestyle expectations are different, ASFA's Retirement Standard provides helpful frameworks and guidance on the average cost of a modest or comfortable retirement in Australia.

Another important question, and one we're focused on at TAL, is: How long do I need my retirement income to last?

While it's impossible to predict exactly how long a person will live, we wanted to move beyond the averages. A deep dive analysis of "longevity risk" from TAL actuaries specialising in retirement has identified key myths to avoid and tips to help superannuation funds and advisers provide the right guidance and products to members.

A more nuanced understanding of life expectancy can also support better financial planning, helping Australians find the right balance in their spending. - avoiding the risks of depleting their funds too quickly, or being overly cautious and compromising on their standard of living.

By improving our understanding of life expectancy across the whole financial services value chain, we can support more Australians to enjoy a secure and fulfilling retirement.

Life expectancy myths and realities

Our analysis uncovered the following about five commonly held myths around life expectancy.*

Myth 1. 'Life expectancy from birth' statistics are relevant for older Australians.

The reality: As we get older, our life expectancy increases. This is because life expectancy statistics consider all the deaths likely to occur from infancy, childhood and throughout adulthood, skewing the average downward. So, while children born today have an average life expectancy of 81 for boys and 85 for girls, this will increase as they move through life.

For today's 65-year-olds, this equates to average life expectancies of 85 years for men and 88 for women. Moreover, as this group moves through retirement, they'll continue to benefit from improved living standards, medical advancements and healthcare improvements. Based on recent trends, this is likely to further increase their average life expectancy to age 88 for men and 90 for women.

Myth 2. I only need my retirement savings to last until my life expectancy.

The reality: Life expectancy statistics are based on averages. In any cohort, some people will die sooner and others will live much longer. When we factor in expected lifestyle improvements, the probability of a 65-year-old today living beyond age 95 is 20% for men and 29% for women. So, planning only for the average life expectancy could leave retirees financially vulnerable in their later years.

Myth 3: Planning for retirement as a couple simply means calculating each partner's life expectancy.

The reality: Many couples assume they'll live until roughly the same age. But for today's 65-year-old couples, there's a 24% chance that one partner will survive the other by at least 15 years. Couples need to plan for the longer-living partner, to ensure their savings will last the distance.

Myth 4: The age my parents or grandparents died is a good predictor of how long I'll live.

The reality: While genetics do play a role, family history doesn't necessarily predict the future. For 65-year-olds in the 1960s, the average life expectancy was age 78 for men and 81 for women. Two generations later - when we factor in the lifestyle improvements mentioned above - these averages have increased by around 9 years for both sexes.

Myth 5: I'm fairly typical, so the population statistics are relevant for me.

The reality: Statistical averages don't help us define the 'average' Australian. We all have unique health and lifestyle characteristics that influence our life expectancy. Socio-economic factors - like our income, occupation and even where we live - can create a disparity. For today's 65-year-olds, this gap is around three or four years between the most and least disadvantaged.

With 2.5 million Australians expected to retire within the next decade, it's imperative they're well-equipped for the realities of life after work. Data like this can help make conversations about planning for the long term easier. It can help super funds and financial advisers confidently navigate these discussions with members, leading to more informed decisions and better retirement outcomes.

Removing the guesswork with lifetime income solutions

A well-planned retirement isn't just about saving enough-it's about ensuring financial security for the years ahead. This requires the right products that can provide financial stability for life.

Lifetime income solutions can go a long way towards helping Australians manage their longevity risk by providing a guaranteed income stream, regardless of how long they or their partner lives. These solutions are designed to be integrated with an account-based pension, along with Age Pension entitlements, to smooth out retirement cashflow, even if retirees spend more of their savings in the early, and generally more active, stages of retirement.

Another benefit of lifetime income solutions is that they can be designed to suit a retiree's specific needs, with flexibility around when to start taking income and how much and features like spouse protection, withdrawal options and death benefits.

By understanding the intricacies of life expectancy and embracing solutions that provide lasting income, Australians can retire with confidence, knowing they have the financial foundation to support their future.

*Data sources

Australian Government Actuary, Australian life tables 2020-2022, December 2024.

Australian Centre for Population, Sub-group mortality: A microdata approach to resident sub-group life tables, December 2021.H