30-year chart is pointer to retirement outcomes

Every retirement financial plan includes a variety of assumptions, as nobody knows what life will throw at them. Retirement often comes with the added uncertainties of a loss of income from work, ongoing health problems and greater flexibility in using time. In a world where headlines prefer gloom over-optimism, retirees face perhaps 30 years of investing not knowing the returns or risks they face. However, while ‘failing to plan is planning to fail’ is an exaggeration, a long-term plan can draw on the past to make more informed decisions.

Each year, Vanguard releases an Index Chart that shows the performance of major asset classes over the previous 30 years. It is an appropriate period for retirees and advisers to judge long-term investing plans and outcomes as it also coincides with the likely period of retirement.

Balaji Gopal, Head of Financial Adviser Services at Vanguard Australia, says:

“While investors shouldn’t rely on past performance, 30 years of market history has proved that the impact of geopolitical, economic, and social events on performance is usually short-lived, and markets will typically recover and rise over time. Looking back over the last few decades, bear markets on average last only 0.9 years and are generally followed by a bull market, averaging 6.5 years. Investors who stay invested through downturns are therefore best poised to benefit when markets inevitably bounce back.”

Let’s first look and how long people are likely to live then check the asset performance numbers.

Life expectancy at 65 is not the same as at birth

There is a common misunderstanding about life expectancy as quoted in the Life Tables issued by the Australian Bureau of Statistics (ABS). The latest ABS release shows life expectancy at birth is:

In 2021, 81.3 years for males (in 1991, 74.4 years), and
In 2021, 85.4 years for females (in 1991, 80.3 years).

In the 30 years since 1991, the gap between male and female life expectancy has narrowed from 5.9 years to 4.1 years. Males are living 6.9 years longer than in 1991, rising at the rate of a year of life expectancy every four to five years.

Source: https://www.morningstar.com.au/insights/retirement/238307/30-year-chart-is-pointer-to-retirement-outcomes

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30-year chart is pointer to retirement outcomes

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