The Average Retiree will spend their entire super within five years, leaving them dependent on the age pension for more than 12 years, new research has warned.

The secret to living the desired retirement lifestyle could be to live fast and die young.

Most of us want to retire early and we want to be comfortable. However, with life expectancy continuing to rise, we are potentially leaving ourselves short of cash in our retirement years.

The research suggests many Australians are facing the prospect of having to push out their retirement plans by at least 10 years.

The findings, based on commissioned research and data gathered from AMP’s retirement simulator, revealed that the average Australian man who retires at 65 will have a super shortage of 11.9 years, while women, thanks to their extended life expectancy, will have a super shortage of 14.1 years.

Women, however, have a greater understanding that they will likely be left short, with 71 percent saying they’re worried about having enough money in retirement, compared with just 50 percent of men.

The reality is that today we need to make our earnings from 40 to 50 years in the workforce, extend across 80 to 90 years of living. There is a worrying gap between expectation and reality.

It’s important to think about your retirement goals and whether your super contributions will fund the retirement you want early on in life. Planning early will go a long way towards bridging the super shortage between the retirement we want and the one facing us.

While 34-44-year-olds are most likely to be low on cash if they retire at 65, with a super shortage of 13.6 years, 81 percent of 25-34-year-olds are the most worried. This could be why this younger age group actually has one of the lowest super shortages (12.1 years).

However, if all these age groups decided to retire at 75 rather than 65, the super shortages shorten significantly, with those aged 55-64 actually receiving two years more super than they may need, based on average life expectancy.

(Research Courtesy of AMP)

The role of Reverse Mortgages in helping the Average retiree to extend their Super and still have a good mobile Lifestyle well into their Eighties is an increasingly attractive option.

Whilst a Reverse Mortgage is available at 60 it is not typically obtained until into the seventies.

Here it can offer a lump sum to bring homes up to speed, replace Cars and make travel available.

This can be combined with a 10 year extra income plan to supplement or replace your pension.

At 70 you would qualify for up to 25% of your homes Equity to be released in this way. On a home worth a $1,000,000 that would be $250,000 available.

One approach could be $125,000 for Home Renovation, Car upgrade and Holiday plus $1000 extra a month to supplement your pension or Remaining Super for 10 years

Once in your Eighties you tend to slow down quite a bit and its a sad fact most will need Aged Care eventually in this decade. Aged care is typically needed when the body is failing. The average length of time someone remains in Aged Care is only 2 years before passing away. 5 Years will see well over 90% of people gone.

Aged Care requires a large Deposit to be paid down on costs that will occur over the period your Aged Care is required. At this stage of your life you may need to sell your home to obtain this or if you have enough Equity in your property you can take out an Aged Care Loan to fund this. This may be a good option if the Aged Care is for an injury and you intend to recover and return home.

An Aged Care Loans works very similar to a Reverse Mortgage but has a higher percentage of Equity Available.

In all instances we recommend talking to Centrelink, Family and a Financial Advisor to make sure you fully understand what is happening and the effects if any it has on pensions.

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