The Longevity Conversation: Why Personalised Planning Horizons are the Missing Link in Retirement Advice

In the complex landscape of retirement planning, one question towers above all others: "How long will my money need to last?" Yet remarkably, this component remains the single greatest gap in current retirement planning frameworks.

Knowing your client rules

Section 961B–E of the Corporations Act  requires financial advisers to document each client’s assets, income needs, investment preferences and risk tolerances. Yet when it comes to longevity — one of the most crucial factors for retirement planning — advisers often fall back on and refer to blunt population averages, as if every client will live to the same age.

This approach overlooks a fundamental component of truly knowing your client – their attitude towards longevity risk. By longevity risk, we mean the possibility of spending too quickly and outliving one's savings. This represents one of the greatest threats to retirement security. Yet, clients are rarely asked directly about their comfort level with this uncertainty or their preferred confidence threshold for lifetime income sustainability.

The question every adviser should ask

We propose that every retirement planning conversation should include this pivotal question:

"What level of confidence do you want that your retirement income will last your entire lifetime?"

This simple question opens the door to meaningful dialogue about longevity risk and empowers clients to make informed decisions about their financial future.

However, before clients can meaningfully answer this question, advisers must provide context about potential lifespans and the inherent trade-offs between income levels and planning horizons.

A practical example

Let's follow Marie, a healthy 65-year-old woman planning retirement alongside her 65-year-old partner. Under the current ASIC Regulatory Guide RG 276 (superannuation forecasts), a retirement estimate, using a single planning period, must use age 92 by default.

But, looking at Figure 1 below, which shows the probabilities of survival to different ages for Marie and her partner, how useful is this approach for Marie's unique situation? 

If Marie’s adviser simply uses age 92, there would be a 65% chance that at least one of Marie or her partner will outlive that planning period.

Calculations based on ALT2020-22 with 25-year improvement rates.

What does "good" look like?

Step 1: Longevity education

In an ideal world, Marie’s adviser would start by explaining that individual lifespans vary widely — and that it’s impossible to predict exactly how long any one person will live. The good news is that actuaries have a strong grasp of population mortality. Using Life Tables, we can estimate the probability of living to each potential age.

Rather than focusing solely on life expectancy — which reflects only a ~50% chance of being sufficient — the adviser explores a range of possible lifespan outcomes, as follows:

• 50% probability (life expectancy): The age at which half of people with similar characteristics will have passed away.
• 75% probability: The age that three in four people with similar characteristics will have passed away.
• 90% probability: The age that nine in ten will have passed away.

This framing helps Marie grasp the uncertainty around individual longevity and the importance of planning beyond simple averages based on how confident she wishes her retirement income to last.

Step 2: Personalised longevity assessment

Using a lifespan calculator (such as the Optimum Pensions Lifespan Calculator ^[1] ), Marie and her adviser enter her personal health information to generate tailored survival probabilities. These personalised projections often extend far beyond standard Australian Life Table figures, providing a more accurate picture of her potential longevity.

Importantly, this type of calculator illustrates not just individual survival probabilities but also the likelihood that at least one member of the couple will survive to various points in time — a critical planning consideration for couples who want their finances to be able to last as long as either partner could live.

Step 3: Translating probabilities to confidence levels

Next, the adviser reframes these probabilities as "confidence levels" for retirement planning. This translation makes statistical-sounding concepts more relevant to practical planning decisions and helps Marie feel confident about her retirement journey.

The Lifespan Calculator shows that for Marie and her partner:

• To be 50% confident, they should plan for their retirement to last for 29 years (to age 94)

This means: "Your suggested planning horizon is to age 94. There is a 50% chance one of you may live longer than this."

• To be 75% confident, they should plan for 33 additional years (to age 98)

This means: "Your suggested planning horizon is to age 98. There is a 25% chance one of you may live longer than this."

• To be 90% confident, they should plan for 35 additional years (to age 100)

This means: "Your suggested planning horizon is to age 100. There is only a 10% chance you may live longer than this."

By presenting longevity in these terms, Marie can better grasp what each confidence level means for her personal retirement plan. This clarity transforms abstract probabilities into actionable planning horizons that directly inform financial decisions.

We show planning period confidence levels for Marie and her partner in Figure 2 below.

Figure 2: Planning period confidence levels for a Couple retiring at 65. The percentages indicate how confident they can be that the planning period will cover both their (unknown) lifespans.

^{Note: Ages rounded to the nearest year | Source: Australian Life Tables 2020 -22 with 25-year improvement}

Marie now understands that the “standard” planning age 92 only offers a 35% confidence level for a couple with her and her partner’s characteristics — a realisation that gives her pause.

Step 4: Illustrating the income trade-offs

The adviser can then explain how higher confidence levels impact what sustainable income may be achievable from different retirement income stream products.

By demonstrating how stretching resources across a longer planning horizon necessitates moderation in annual withdrawal rates (such as with account-based superannuation), the adviser helps Marie understand the practical implications of her confidence choice.

Figure 3 is a sample of what that trade-off might look like using an account-based pension (using illustrative income levels only and ignoring investment risk for now). An adviser might use a chart like this to illustrate the trade-off between confidence level and expected income.

Figure 3: Trade-off between confidence level and expected income using Account Based Pension (illustrative income only)

For advisers and superannuation funds that work with lifetime income streams, this is the point to include them in the conversation. Lifetime income products pool longevity risk across many individuals, potentially allowing them to generate higher income at higher confidence levels. 

Because lifetime annuities don’t need to reserve for the possibility that every individual lives to 100 or beyond, they can deliver income with greater efficiency than purely self-funded drawdowns. For clients like Marie — who want more certainty without dramatically reducing their lifestyle early in retirement—  these products can be a valuable part of the retirement toolkit.

Step 5: Documenting client preference

Marie's adviser then discusses, "What level of confidence would you like that your retirement income will last your entire lifetime?"

After considering the trade-offs, Marie selects the 75% confidence level (planning to age 98). This choice reflects her and her partner’s personal preference between income desires and security needs — a fundamentally personal decision that only she could make once properly informed.

Marie's adviser documents this 75% confidence preference in her Record of Advice, creating a cornerstone reference point for all future retirement planning decisions.

For financial advisers and digital advice tools seeking to enhance the retirement planning approach, we recommend:

1. Integrate longevity discussions into the standard planning methodology
2. Document client confidence preferences in their client records
3. Utilise retirement calculators that allow for different confidence level inputs
4. Present comparative outcomes showing trade-offs between expected income and confidence levels (for example, at 50%, 75%, and 90%)

By systematically addressing longevity risk in the context of client preferences, advisers can create more transparent, personalised, and ultimately more valuable retirement planning outcomes.

Documenting the client’s longevity confidence preference as part of Know Your Client obligations provides a clear audit trail — a critical safeguard against future regulatory scrutiny and an essential component of sound risk management.

The approach transforms what was once a standardised ‘one-size-fits-all’ assumption into a client-directed decision point, enhancing the quality of advice and client engagement.

Our vision is for all Australian retirees to have secure, sustainable living standards throughout retirement, regardless of longevity.

We believe the Longevity Conversation represents an essential step forward—empowering clients to make informed decisions about one of the superannuation industry’s most significant uncertainties.

By transforming retirement through innovation, education, and acceleration, actuaries can help to create clearer pathways to improved longevity literacy and risk management.

When advisers and digital advice tools engage clients meaningfully about confidence levels and planning horizons, they address the fundamental but often missing piece in retirement advice frameworks.

The result? Better-equipped, safer advice processes tailored to individual needs and preferences—no matter how long the journey lasts.

Footnotes

^[1] The Optimum Pensions Lifespan Calculator was developed in conjunction with Hannover Re.

Conflict of Interest Disclosure: The authors of this article are affiliated with Optimum Pensions. The article references the Optimum Pensions Lifespan Calculator as an example tool for personalised longevity assessment.