Risks in Retirement – The need for Financial Planning!

Posted on 15. Nov, 2010 by in Financial Planning

Financial Planning Ascot Vale Retirement LongevityThere are many challenging issues in retirement and some of the most commonly discussed these days are longevity, inflation, volatility, emotional issues & timing. I will provide some of my thoughts around each of these issues in the next few blogs.

The first of the issues is longevity… now did you know that a 60 year old male today has a life expectancy of 84 and is a one in four case to make 90…. a female 60 now will have a life expectancy of 88 and believe it a one on three chance of making 90! It gets better using the same example, if you are a 60 year old couple today you have a life expectancy of 90 …that’s says something about marriage being good for us!! (source: Australian Life Tables and Milliman)

If you would like to know how long you might live go to www.mylongevity.com.au I have found this survey a useful and fun tool to use.

The point of reiterating the above is that if you are a normal 60 year old you are looking to fund a retirement for a period of between 25-30 years minimum. Now if you want to live a modest lifestyle as a couple in retirement then you will need approx $52,000 per year and in the case of a single person approx $38,000 (source: Westpac ASFA Retirement standard- Dec qtr 2009)….in order to achieve this income indexed to inflation you will need a lump sum of approx. $950,000 for a couple and $700,000 for a single person. The lump sums required will vary depending on the assumptions made, but they will be close to these figures.

To live a modest retirement requires a significant savings pool at the commencement of retirement so it is never too late to start saving and the earlier you start saving, the less you will have to put aside to achieve your goal. Another issue is what sort of lifestyle you would like in retirement, and how should you structure your finances to achieve the lifestyle you desire? A qualified financial planner can help you work through these issues.


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