The title for the oldest Australian rests with Christina Cock who was 114 years, 148 days old when she died in 2002. While there aren’t many people who could claim to reach such a fine age, the 2015 Intergenerational Report tells us that Australians are living longer. This means that we all need to plan for even more years in retirement than any previous generation.

But how can you plan for the unknown? If only working out how much you need in retirement savings were an exact science you would simply multiply how long you were going to live times how much income you would need each year and choose an investment to provide the appropriate returns, then start working towards that magical figure.

As we all know, life is never quite that simple so what can we do?

Living longer

The statistics report that the average man will live around 19 years after age 65 and the average woman just over 22 years post-65. However, if you reach 75, expect to reach 87 if you’re male and 89 if you’re female.

But what about you? The best retirement plan is to regularly review your situation, your health, and your goals. What’s right at age 65 might change very quickly, particularly your health.

Living expenses

How will your living expenses change when you retire? Will they drop because you are eating at home more frequently and not out with work colleagues? Or maybe expenses will increase because you now have more time on your hands to do the things you’ve always wanted.

For most of us, it’s not until we’ve experienced a year or two of retirement that this question can be properly answered. In the meantime, take note of the combined ASFA Retirement Standard which suggests around $59,000 per annum is needed for the average couple to enjoy a comfortable retirement. Or, for around $34,000, the same couple might expect a more modest lifestyle, missing out on the niceties in life.

Investment markets

Finally, we have the fluctuating fortunes of market returns to factor into the equation. What’s right for you will depend on your own circumstances, needs and options – your retirement plan.

One approach is to match your retirement savings to the nature of your living expenses. For example, if you have $20,000 a year of fixed living expenses like groceries, utility bills and transport, then you might want a secure part of your portfolio to ensure these are covered. Then think about some of your discretionary expenses – like upgrading the car or taking an overseas holiday. With longer term, irregular expenses like these, a more active investment might be manageable knowing that your basic living needs won’t be compromised.

Investing wisely and taking appropriate levels of risk at appropriate life stages can put some certainty into your retirement plans even if you don’t think you’ll reach a century. We can help you build a plan to prepare for a comfortable and hopefully long retirement.