Seniors are underestimating their own lifespans, leaving many with a shortfall of retirement funds for their later years, according to new research.
More than 2000 seniors over 50 were quizzed about the average estimated life expectancy of a 65-year-old Australian as well as their own life expectancy estimation based on factors such as their health, lifestyle habits and parents’ life expectancy.
The general level of knowledge about life expectancies was quite low.
Survey respondents thought the average 65-year-old would live to 83.2 years, almost five years below the estimate of Treasury’s 2010 Intergenerational Report (IGR) of 88 years.
Seniors aged 50-54 years underestimated their own life expectancy, with the average estimate seven years below the IGR prediction.
National Seniors chief executive Michael O’Neill said the lack of knowledge about life expectancy would impact seniors’ ability to effectively plan for their finances in retirement.
“It’s no secret that Australians are living longer than ever before but it seems people don’t apply it to themselves and this affects how they plan for their retirement,’’ O’Neill said.
“In a system where people are largely responsible for their own financial wellbeing in retirement, the average 50-year-old is going to find it hard when they have a shortfall in how much money they will need,’’ he said.
“It’s clear that effective retirement budgeting and planning is crucial for those who might face a budgeting shortfall, especially given this lack of knowledge around life expectancy.”
The findings were published in the National Seniors Australia/ Challenger report, How realistic are senior Australians’ retirement plans?
The report identified three areas that affect retirement planning - life expectancy, spending in retirement and aged care costs.
The study found that 53 per cent of pre-retirees will have less than $400,000 or don’t know what funds they will have at the start of their retirement.
Of those who have already retired, 64 per cent had less than $400,000 of household savings or were unable to say how much they had at the start of retirement.
This is well below the $544,000 lump sum that ASIC estimates the average single person will need to live a comfortable retirement.
“The Australian superannuation system isn’t mature and many retirees have not participated in super for the whole of their working lives,” O’Neill said.
“But there is considerable scope for improved education for people around these key issues."