Are you financially prepared to live until you’re 90?

The number of Australians aged 90 and over is expected to explode by more than 250 per cent in just 30 years. The question is, how can we afford to live this long?

Australian women can expect to live 85.1 years, while men have an average life expectancy of 81.1 years, according to latest ABS figures. “Around 30 years ago [1993], life expectancy at birth was 75.0 years for males and 80.9 years for females,” it notes. An ageing population means more of us will live into our 90s and even beyond.

The ABS population pyramid suggests there are 47,122 Australians aged 90, plus tens of thousands more above that. (Interestingly, the table does not include figures for 100 years and over). That is up from just 19,579 nonagenarians 25 years ago, in the year 2000. In another 30 years, the number of 90-year-olds is estimated at 165,637 in 2055 – up 252 per cent.

Living longer costs more

The fact we’re living longer is wonderful news, but problems arise when we don’t have enough in savings to cover those extra years. Estimates for a comfortable lifestyle in retirement suggest singles need $1003 a week, while couples require $1415. Where does this money come from if your superannuation runs dry?

The age pension is roughly half this amount – including maximum pension and energy supplements – at $1149 for singles and $1732.20 for couples per fortnight ($574.50 and $866.10 per week). Furthermore, the recent cost-of-living crisis demonstrated such estimates can be woefully inadequate. Anyone who hadn’t budgeted for this surge is draining their super much faster than planned.

If you are able to (and want to), consider deferring retirement and keep working several more years.

Add to this the differences in how we age. Women statistically live four years longer than men. There are discrepancies between spouses in age, health and genetics. The death of one partner does nothing to stop the other’s living expenses. In fact, they generate funeral and other costs which, combined with any healthcare/palliative care expenses beforehand, can substantially erode joint savings.

Plus, singles lose out on economies of scale (living costs aren’t double for two people compared with one). For women, this is particularly problematic, since the gender pay, superannuation gap, career choice gap and caring gap means they are paying for more years of life with less resources.

Being financially prepared

The good news is that now you are aware of this issue, you can do something about it. There are many facets to planning your finances for a long life, which can include:

• Homeownership: Renters typically face higher living costs in retirement than homeowners. By age 90, homeowners have usually paid off their home, while renters are subject to market forces (typically pushing rents higher). Add to this security – renters can be forced to move repeatedly, incurring further costs.
• Downsizing: many older people are “asset rich, cash poor”, often because the family home has increased exponentially in value in their decades living there. Selling it and downsizing can turn that equity into accessible cash, some of which can be used to purchase a smaller, more manageable home.
• Co-habitation: Security and companionship (essential for older people, especially singles) aren’t the only benefits of living with someone else, whether a friend, sibling or adult child. Doing so allows you to share living costs, receive support with household chores and even generate income (if you own the property and sub-let a room or granny flat).
• Claiming a pension: Many people needlessly discount their eligibility for a pension, either by overestimating the value of their assets or not realising they could claim a part-pension. Any pension you receive, plus the pensioner discounts it unlocks, conserves your super.
• Delaying retirement: If you are able to (and want to), consider deferring retirement and keep working several more years. This has the dual benefits of extra money going into your super and delaying when you begin drawing down money from it.
• Proactive investing: It’s never too late to start investing. Investments can create an alternative source of income to conserve your super balance or build additional wealth to leverage in future years.
• Good financial foundations: Good financial foundations now will provide a stable footing for your golden years. That means a solid emergency fund, up-to-date spending and investment plan, comprehensive insurance coverage, appropriate super structure and investments, and strong estate planning safeguards.
• Professional advice: Tailored advice from your financial adviser will help you avoid exhausting your retirement savings prematurely, such as from overpaid taxes, unclaimed benefits or unnecessary and unmitigated risks.

Ultimately, being blessed with a long life shouldn’t become a curse that forces you into poverty. A bit of considered planning earlier in life will help you stretch your money further and ensure that you have enough to your name to live comfortably into your 90s and beyond.

Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99).

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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