Australians are going to be living longer and need to be financially prepared for at least 20 years in retirement, according to the Actuaries Institute.
The warning came as the Australian Bureau of Statistics (ABS) projected life expectancy at birth age for men of 79.9 and 84.3 for women.
But the Institute warned that those who are already 65 can expect to live longer as longevity improves.
It predicts average life expectancy for men aged over 65 will now be 86 for men and 89 for women. This means men will have to plan for 21 years of retirement while women need to plan for 24 years of retirement.
One in three 65-year-olds could live past 90, and one in five could live past 95, meaning they could spend up to three decades in retirement.
“Most people don’t realise how long they might live,” president of the Institute John Newman said.
“With rapid advances in medicine and the dramatic improvement in life expectancy, it is quite conceivable that in the coming years half of all healthy 65-year-olds will live past 100.”
Newman strongly recommends lifting the pension age in line with increases in life expectancies.
The Institute released a white paper in September 2012, which emphasised the need for urgent retirement policy reform as life expectancy increases.
Since launching the paper “Australia’s Longevity Tsunami, what should we do?” and government consultations, the Institute welcomed changes in the May 2013 federal budget, which removed inequitable tax treatment of deferred lifetime annuities and allowed them the same tax treatment as current income streams.
“We’ve made an important step in placing the urgent issue of longevity risk firmly on the agenda. We are focused on improving education on this issue, to ensure future generations have a better a chance of planning for their retirement adequately,” Newman said.