Retirees will have to ring in their spending if they want to have enough funds to live a long life with a new data revealing people across the world are outliving their hard-earned cash by around a decade.
Shockingly for Australian men 65-year-old’s only have enough savings to cover 9.7 years of retirement income. Meanwhile, the situation is much more concerning for Aussie women who have a longer life-expectancy, with a whopping 12.6 gap recorded.
Australians aren’t alone in this with those in the United Kingdom, Canada and the Netherlands all facing around 10 years of financial uncertainty.
Speaking about the worrying results, report co-author and head of investors at the World Economic Forum said action is required to ensure people across the world can live comfortably in retirement.
“The real risk people need to manage when investing in the their future is the risk of outliving their retirement savings,” he said according to The Sydney Morning Herald.
“As people are living longer, they must ensure they have enough retirement funds to last them through their longer lives. This requires investing with a long-term mindset earlier in life to increase total savings later on.”
The shocking announcement follows the release of a report by Melbourne-based superannuation group Mercer, which revealed that Australians do not have the savings they need, forcing them to spend less in retirement.
“The amount of money people think they will need in retirement does not align to what retired people are actually spending,” the report stated.
“If we assume this is because people do not have the savings they need and are forced to spend less in retirement, it demonstrates a clear need for better communication and engagement.
One reason for this could be that Australians are failing to predict their longevity correctly, with many younger people grossly underestimating how long they will live. However older Australians, particularly those already in retirement, were found to do the opposite.
“Our survey, as with many surveys in the past, has confirmed that people are not good at estimating how long they will live,” the report stated.
“A greater concern is that young people do not think they will reach their life expectancy, yet older people think they will live significantly past it. For those taking on this longevity risk and using the traditional account based pension this could mean initially withdrawing too much, depleting balance levels and then withdrawing too little later in life.
“In reality, however, we tend to see retirees withdrawing the minimum amounts throughout retirement for fear of running out of money too soon.”
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