Longer life expectancy, rising living costs and market instability are putting increased pressure on retirees trying to achieve sustainable income.
Many are likely to exhaust all of their savings within a decade of retirement if they live a comfortable lifestyle.
A new analysis by the Monash Centre for Financial Studies (MCFS) has found that drawdown of superannuation has become “fraught with uncertainty”.
The study, authored by Associate Professor Ummul Ruthbah and Dr Trinh Le from the Monash Business School, found the sustainability of retirement income depended on the size of the starting balance, the mix of equities and bonds and the sequence of market returns in the first years of retirement.
“The findings of the study are sobering,” Associate Professor Ruthbah said.
“Retirees with less than $250,000 face a high likelihood of exhausting their superannuation within a decade if they target a comfortable lifestyle. At balances above about $400,000, the chance of sustaining income rises to near certainty, regardless of portfolio design.”
The analysis also showed a deeper structural challenge regarding gender gaps and policy implications.
Women approaching retirement hold balances 20-30 per cent lower than men, leaving them disproportionately exposed to depletion risk.
“For median female retirees ($212,000), even a balanced portfolio still carries material chances of exhaustion within a decade, while men with median savings ($283,000) face far more secure outcomes,” Associate Professor Ruthbah said.
“This gap has profound implications for retirement adequacy and policy design. It underlines the need for measures to boost women’s superannuation savings, whether through targeted contribution incentives, reforms to address career breaks and pay disparities, or enhancements to the Age Pension safety net.”
