Life Expectancy: the Key Factor in Retirement Planning
Although we call it financial planning, a great part of what we do is retirement planning for our clients in the Perth area. If the recent Financial Services Inquiry (FSI) report is any indication, it will be even more important for every Australian to hire a financial planner at some time during the process of preparing for retirement.
While an increase in life expectancy is obviously seen as a very good development for most people, it has one major downside. Your retirement income has to last longer than it would with a shorter life expectancy.
The real surprise in the report is that Australians tend to underestimate their life expectancy by an average of seven years. Those who are 65 years of age and retiring can now have a reasonable expectation of living to be 90 years of age. One out of ten females who live to be 65 will live to be at least 100 according to the Australian Bureau of Statistics’ (ABS) Australian Life Tables (ALTs).
The Pitfalls of Retirement
If it were just a straight mathematical equation, it would be easy to figure out how much money each individual would need for retirement to sustain their preferred lifestyle. However, there are many factors that go into what will happen to your superannuation fund as you get further into your retirement years.