Life Expectancy and Your Finances: What Australians Need to Know in 2025

Australians are setting new records for living longer, healthier lives. In 2025, the average life expectancy at birth is edging towards 83 years for men and 86 years for women, according to the latest ABS data. This longevity is great news for families and communities, but it also brings new financial challenges—and opportunities.

Why Life Expectancy Matters for Your Money

Living longer means your retirement savings need to last further into the future. The era of retiring at 65 and expecting to live for another decade is over. Now, many Australians are facing 20, 25, or even 30 years of post-work life. That changes the entire equation for superannuation, investment strategies, and even home ownership.

• Superannuation pressure: Withdrawing too much, too early could mean outliving your nest egg. The government’s 2025 Retirement Income Review highlights the need for more flexible income streams to accommodate longer lifespans.

• Healthcare costs: More years mean more health expenses, especially in the final years of life. Private health insurance premiums and out-of-pocket medical costs are rising above inflation.

• Intergenerational wealth: Australians are now inheriting later in life, affecting when and how family wealth is transferred.

The Policy Response: What’s New in 2025?

The government and financial sector are responding to these demographic shifts. In 2025, several updates have come into play:

• Superannuation reforms: The minimum drawdown rates for account-based pensions have been recalibrated to reflect longer retirements, helping retirees stretch their savings further.

• Age Pension adjustments: The age at which you can access the Age Pension is set to increase to 68 by 2030, with incremental steps already in effect. Asset and income test thresholds have also been updated to reflect cost-of-living increases.

• Longevity products: More super funds are offering annuities and longevity protection products, which provide guaranteed income if you reach advanced ages—ensuring you don’t run out of money if you live longer than average.

These policy changes are designed to keep the retirement system sustainable, but they also place more responsibility on individuals to plan proactively.

Planning for a Longer Life: Practical Steps

How can you prepare for a financial future that might last longer than you expect? Here are some steps Australians are taking in 2025:

• Boosting super early: Many are making extra concessional and non-concessional contributions in their 40s and 50s to take advantage of compounding returns.

• Flexible work in later life: The number of over-65s in part-time or consulting roles is rising, both to stay engaged and to top up retirement savings.

• Reviewing health insurance: Comparing policies annually and considering higher excess options is helping retirees manage premium increases.

• Estate planning updates: With later-life inheritances now common, families are reviewing wills, powers of attorney, and succession plans more frequently.

Real-world example: Sydney couple Karen and Mark, both in their late 60s, recently opted to downsize their home and invest the proceeds into a combination of superannuation and an annuity. This gives them a mix of accessible funds and a guaranteed income stream, reducing their anxiety about outliving their savings.

The Bottom Line: Longevity Demands a New Financial Mindset

Rising life expectancy is a cause for celebration, but it also means Australians need to think differently about money. Whether you’re just starting your career or approaching retirement, planning for a longer life is now a must—not a maybe. Start early, stay flexible, and take advantage of the latest policy updates to secure your financial future well into your 80s and beyond.