Considering risk with your retirement savings

None of us know how long we’ll live. That’s why one of the most significant risks in retirement planning is the risk of outliving your savings – also known as longevity risk. 

The average life expectancy at birth for men in Australia is 81 years and women in Australia, on average, can expect to live to 85.¹ But what happens if you live well beyond life expectancy? How can you be better prepared for longevity risk? 

When planning your investments for retirement, here are a couple of strategies to keep in mind that may help. 
 

Diversify your investments 

Investing across different types of investments and asset classes – shares, bonds, property, for example – may help spread the risk of rises and falls in the value of the investments. Shares, for instance, offer much higher growth potential than an investment in bonds, but they also have a higher risk of falling in value. Diversification may help your money go the distance. 
 

Inflation protection 

Over time, inflation can erode the purchasing power of your money. What you can buy with $100 today, for example, is much less than what you could 20 years ago. To help protect your money from the longer-term effects of inflation, you might consider investing in investment products that are indexed to inflation. Some annuities, for example, can provide a guaranteed income for life, mitigating the risk of outliving your savings. Fixed annuities offer predictable income, while inflation protected or index-linked annuities adjust payments according to inflation, helping to maintain your purchasing power over time.