For many Australian retirees, the fear of running out of money stops them from enjoying the time they have. Our industry has rightly focused on preserving capital, but there’s another important goal that deserves our focus: giving retirees the financial confidence that their savings will last for life, so they can get the most out of their healthiest years.
Understanding the relationship between ‘lifespan’ and ‘healthspan’ creates valuable opportunities for Australians planning their retirement – and for superannuation funds to enhance what they offer their members. While lifespan measures the total years someone lives, healthspan focuses on the years spent in good health when they’re able to remain active, independent and engaged in the activities they value most.
Although Australia has one of the world’s highest average life expectancies, we face a 12-year gap between lifespan and healthspan – the second-largest globally after the US.
This statistic reflects a pattern seen across wealthy nations where medical advances have significantly extended life expectancies, but the quality of those additional years varies based on individual planning and lifestyle choices. This can have a significant impact on individual retirement outcomes.
Healthcare systems worldwide are shifting focus from simply extending lifespan to enhancing quality of life.
The goal isn’t just to add years to a person’s life, but to add life to their years – and that means optimising the active, healthy and productive period they can enjoy the most.
Meeting different needs in early and later retirement
TAL’s latest research into the expectations of pre-retirees and the lived experience of retirees reveals an important insight about healthspan and timing. While almost half of pre-retirees are anxious about their future physical and mental health, the reality of retirement is more encouraging. Among current retirees, 52 per cent report better health than their parents at the same age, and 34 per cent find themselves busier and more active than they’d previously expected.
However, the study also highlights a missed opportunity, with 21 per cent of retirees wishing they’d enjoyed their early retirement years more. This is the period when retirees are typically best able to engage in the active lifestyle they’ve planned for, one that includes physical pursuits, travel and family fun.
The challenge isn’t just around having money – it’s about having the confidence to spend it. Many retirees struggle with what financial advisers call the ‘permission to spend’ dilemma: they need reassurance that spending today won’t jeopardise their financial security tomorrow.
Financial confidence matters just as much in later retirement when activity levels naturally moderate, by providing the foundation to live comfortably with dignity and choice. It enables retirees to remain connected to family and community, to be generous with gifts that make a difference in loved ones’ lives, and to access quality care without feeling like a burden. Having this confidence and security transforms later retirement from a period of constraint into one of continued fulfilment and connection.
Implications for retirement products
Traditional product design focuses primarily on mortality risk (ensuring a person’s savings will last as long as they live), but optimising member wellbeing means matching income strategies to healthspan realities.
TAL’s research shows that 57 per cent of pre-retirees are looking forward to spending time on travel, hobbies, volunteering and exercise – activities that tend to cluster in the earlier retirement years. Yet half of the pre-retirees we surveyed also expect to have less spending power in retirement, with this fear causing many to underspend.
Retirement income solutions that allow higher and more flexible spending early on can unlock more rewarding retirement experiences. This approach recognises the different purposes of income spent in a person’s 60s, when they can still travel extensively and pursue active hobbies, compared to income spent later when mobility naturally reduces.
The solution lies in combining flexibility with certainty. By integrating account-based pensions with lifetime income products, retirees gain:
• the flexibility to spend confidently during their healthiest years, knowing they can draw down their account-based pension to fund the experiences that matter most and;
• the certainty of an income that’s guaranteed to continue regardless of how long they live, to meet their evolving needs in later retirement.
This combination does not just address the fear of running out of money – it provides the confidence to live well at every stage.
Opportunities for superannuation funds
Super funds are uniquely positioned to lead the healthspan conversation and make the most of the long-term relationships they build with members throughout their working lives and into retirement. This creates opportunities to:
• Educate holistically. TAL’s research reveals pre-retirees’ top concerns are health-related, with 46% worried about declining physical health and 44 per cent about reduced mobility. Funds can expand their educational role beyond investment returns to encompass the health behaviours, lifestyle choices and timing decisions that maximise healthspan.
• Design integrated products. With 44 per cent of pre-retirees interested or very interested in lifetime income products, there’s a clear appetite among members. Funds can make the most of this interest by explaining products in terms of supporting their healthspan goals at each phase of retirement.
• Frame the conversation positively. Rather than focusing on risks and limitations, funds can help members see retirement income planning as enabling two interconnected opportunities: the freedom to make the most of active, healthy years through confident spending, and the security to live well in later retirement with the support of lifetime income.
By embracing healthspan as a core principle in product design, advice delivery and member engagement, super funds can position themselves as partners in members’ total retirement wellbeing beyond their financial security. In this role, funds can unlock the confidence for members to truly enjoy the retirement they’ve worked their whole lives to achieve.
Shaun Bransdon is GM of retirement and wealth and Dr Priya Chagan is head of health services at TAL.
