AUSTRALIANS today need to do something our parents and grandparents didn't even think about - plan for a long life, and a new report shows the benefits of planning for longevity go beyond money matters.
Australians enjoy one of the longest life expectancies in the world. Around 3.7 million of us (15 per cent of the population) are aged 65 and over, and today's 60-somethings can expect to live for another 20 years on average. That's an increase of more than eight years for men and almost 10 years for women since the turn of the century.
However, a new study by National Seniors Australia (NSA) shows that our savings behaviour is not keeping pace with increasing life expectancy.
The challenge of ageing is simple - in theory at least. We need to make earnings from 40 to 50 years in the workforce extend across 80 to 90 years of living.
The NSA report highlights a key problem with this: we have a tendency to take the present more seriously than the future, and that means we often fail to save enough to pay for later life.
The same study found that what matters most to people about their finances in retirement is having regular, constant income. Conserving capital to leave money for the next generation is becoming less of a consideration for many Australians.
Nonetheless, many of us expect to maintain similar spending patterns in retirement as we did in the workforce. Crunch time often comes as we head towards retiring age, and the reality of what may be a limited nest egg becomes more obvious.
We also have a tendency to make plans for travel and leisure in early retirement. However, it pays to look a little further over the horizon and consider how you will meet aged care costs because chances are, either you - or your family - will need to pay for them.
It all highlights the need for good planning. The NSA found that people who have no plans to deal with an increased lifespan are more likely to experience financial, social and emotional disadvantages.
I'm pretty sure that's not the outcome you want for your retirement. Thankfully there is a solution. Part of the answer lies in committing to saving for retirement while you have enough income to do so. But it also hinges on how you use your super and other investments once you leave the workforce.
Striking the balance between a quality retirement and running out of funds prematurely is a juggling act that calls for expert financial advice, and it's not something you should put off until you're ready to walk away from the workforce for the last time. Seeking good advice early can be one of your best investments.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.