Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 21

The financial life cycle paradox

Changing lifestyles combined with increasing life expectancy have outgrown traditional retirement planning models. But living longer does not translate into financial freedom. The natural conclusion is that you can work longer and therefore have more savings for your retirement. But the paradox is that people have less income-earning years and more education years and a better education does not necessarily lead to an improved financial position.

Increased life expectancy

Over the last 50 years, life expectancy has increased by around 12 years. A child born today will live until they are in their early 90s, and possibly much longer. The reasons Australians are living longer include better diet, improved medicines and living conditions.

In addition to everyone living longer, people are delaying significant life events. Australians are getting married and starting families later and having fewer children. Higher property costs means that children are staying at home longer and this is reflected in the increasing age of first home buyers. Many of these decisions regarding lifestyle are made because of someone’s financial position.

Economic structural changes

There have also been structural changes to the Australian economy that are impacting on an individual’s ability to save and invest for their future. Notably, Australia has increasingly become a high cost of production economy and to compete internationally we must improve our skills and qualifications. Australians are therefore spending more time at school and in tertiary and vocational training at a financial cost to themselves. Even with Government assistance to fund tertiary education many young adults are starting their working years indebted.

Another major structural change occurring is the increasing trend to casual or part time work.  Until the early 1990s it was common to have a job with one organisation for life. Today, this is rare and it is expected that people will change not only jobs four or five times in their career, but also the industry. This trend to part time or casual work, particularly amongst older workers, means their pre-retirement incomes are lower, limiting their ability to save.

Wealthmaker Financial Services has analysed these trends and structural changes, producing some telling ratios that have implications not only for financial institutions, but every Australian.


Life Expectancy Analysis





Life expectancy



Comprised of:
Childhood & education



Income earning






Ratio Analysis
Income Earning/Life Expectancy



Retirement/Life Expectancy



Income Earning/Retirement



Sources: CIA World Fact Book, World Bank, ABS School Statistics Census, Australian Bureau of Statistics.  Averaging has been applied to cover the differences, e.g. males versus females.

The table shows that a person born in 1960 was expected to live to 71, today that person’s life expectancy has been revised to 82. The table then shows how those years will be spent. The table contains three important points for all of us:

1. Income earning/life expectancy

In 1960 the average Australian spent 61.7% of their life working, whereas today it’s only 42.7%.  This means that Australians have less time in the workforce, and therefore a reduced timeframe to save and invest for their retirement.

2. Retirement/life expectancy

In 1960 the average Australian was expected to live for 8 years after they retired. Today it’s around 22 years. For many in their pre-retirement years, they are unable to accumulate any more wealth because they are working part-time, even though they may wish to work full time. This means that their income is being used for living expenses.

3. Income Earning/retirement

In 1960, an Australian had 5.5 income-earning years to save or invest for each retirement year. Today the ratio is 1.6 earning years. An individual must save enough during their income-earning years to pay for 22 years of expected retirement.

Another factor frequently overlooked is the increasing tertiary education costs. Even with HECS and VET fee assistance, most children today when they start their working lives are indebted and often have to pay off this debt before they take out a mortgage. This is unlike the baby boomers, many of whom received free tertiary education, so they started their working lives debt free.

As our income-earning years are decreasing and our retirement years are increasing the current level of superannuation savings is insufficient. The Federal Government is taking some action to address this by increasing the superannuation levy, however, this only goes part of the way.  Australians will have to work longer and may have to accept a lower standard of living both before and in retirement.

Michael McAlary is Founder and Managing Director of WealthMaker Financial Services.




Putting off that retirement speech

The future of retirement is already here

The reality of three phases of retirement


Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Latest Updates


How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, stay connected with friends and the community ... should you defer retirement or just do it?


Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.


Why short-termism is both a travesty and an opportunity

On any given day, whether the stockmarket rises or falls is a coin toss, but stay invested for 10 years and the odds are excellent. It's at times of market selloffs that opportunities present for long-term investors.

Investment strategies

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

No excuses: Plan now for recession

The signs of a coming recession are building, especially in the US. In personal and business decisions, it's time to be more conservative and engage in risk management until some of the uncertainty is resolved. 


The fall of Volt Bank removes another bank competitor

The startup banks were supposed to challenge the lazy, oligopolistic major banks, but 86 400, Xinja and now Volt have gone. Why did Volt disappear so quickly when it had gained deposit support and name recognition?


Three main challenges to online ads and ‘surveillance capitalism’

Surveillance capitalism refers to the collection and use of consumer data to further profits. Will a renewed focus on privacy change the online-ad business model, or is it too entrenched?



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.