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Retirement savings challenge
How many years do you expect to spend in retirement?

This is, of course, a basic question for anyone who is seriously saving to finance an
adequate standard of living in retirement.

The Pensioner Mortality Investigation 2005-2009, the latest research on life expectancy from
financial services and human resources group Mercer, estimates that 65-year-old
males and females receiving public-sector pensions can expect to live until
87.8 and 89.9 years of age, respectively.

Significantly, this research takes into account expectations that mortality rates will
continue to decrease.

In other words, a person who retires at 65 should expect - depending upon personal
circumstances - to spend close to a quarter of a century or so in retirement.

Society at a Glance, published last year by the OECD, shows that Japan, Switzerland and Australia rank among the OECD
countries with the longest life expectancies.

There is a nine-year gap between the OECD country with the highest life expectancy (Japan) and the country with the lowest (Turkey).

Society at a Glance also indicates that Australians will spend more of their lives in
retirement than retirees in most other major OECD countries.

Although Australia has a higher age for pension eligibility than the OECD average, our long life
expectancy markedly increases the number of years we are likely to spend in

Not surprisingly, the difficult investment markets in the wake of the GFC are
encouraging many older Australians to extend their working lives.

An extensive survey of older Australians released this week, Financial Wellbeing: Concerns and Choices Amongst Older Australia, found that almost 50 per cent of workers surveyed had delayed or intended to delay their retirement because of
market uncertainty.

This report - prepared by the Australian
National University,
AMP, Rice Warner Actuaries and National Seniors Australia - reports that older
workers who still have a mortgage are 20 per cent more likely to delay their
retirement. (

From a financial perspective, a decision to delay retirement not only provides an
opportunity to save more but means the number of years of drawing down on
retirement savings is reduced.

An ability to postpone retirement obviously depends largely on personal circumstances
including health and job opportunities.

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia

21 June 2012