A new chapter begins

Retirement is changing. And so is investing. 

Investing for retirement is no longer a simple, one-time event. Thanks to longer lifespans, changing lifestyles, and new technologies, retirement has become a complex, multi-stage journey. 

People are living and working longer, and retirement can last 30 years or more. This means your investment approach may need to adapt to these changes.

Governments, superannuation funds, financial advisers, healthcare providers, insurers, and technology companies are all working together to create better retirement solutions. Understanding these changes can help you plan smarter and feel more confident about your financial future.

Demographic changes: living longer means planning smarter

The number of people aged 65 and older is expected to grow by 35% worldwide over the next decade, reaching about 1.2 billion people.[1] At the same time, fewer babies are being born, which puts extra pressure on retirement systems and governments.
In Australia, the population aged 65+ was 4.31 million in 2021 and is projected to grow to 6.66 million by 2041, a 54% increase. This group will increase from 16.8% to 20.8% of the total population.
Source: https://www.abs.gov.au/

In Australia, where a compulsory superannuation system exists alongside a government Age Pension, over 100,000 people retire each year.[2] This creates new challenges and opportunities for managing retirement savings.

Because people are living longer, retirement is no longer a single event but a series of life stages. You might move from full-time work to part-time, change your living arrangements, or face new health and family responsibilities. Your investments should be flexible enough to support these changes.

Behavioural changes: what retirees and their families care about

While money is important, health and independence are top concerns for retirees and their families. Many adult children worry more about their parents’ health than their finances, and retirees themselves prioritise staying healthy and independent.[3]

This means retirement planning isn’t just about money - it’s about supporting your lifestyle, dignity, and well-being. Investments and retirement products should reflect these priorities by offering stability, income, and flexibility.

Account-Based Pensions (ABPs) are the dominant retirement income product, representing 88% to 94% of post-retirement assets in Australia.
Source: https://treasury.gov.au/sites/default/files/2019-03/R2009-001_Final_Report_Part_2_Chapter_7.pdf

Technology and regulation: new tools and rules for a new era

Technology, especially artificial intelligence, can transform how people plan and manage their retirement.

At the same time, governments are updating rules to protect investors and encourage saving. However, some regulations can limit how superannuation funds and financial advisers innovate. Collaboration between industry players and policymakers is needed to create better retirement ecosystems.

Practical guidance for investing as you approach retirement

As you get closer to retirement, your investment strategy and risk tolerance can change. The goal is often to protect your savings while still allowing your money to grow enough to support your retirement lifestyle.
  1. Understand your risk tolerance
    You may feel less comfortable with big ups and downs in the market as retirement nears. This is normal. Reducing risk may help protect your savings from sudden losses.
  2. Diversify your investments
    It can be unwise to put all your eggs in one basket. Spreading your money across different types of investments may help reduce investment risk.
  3. Shift toward stability and income
    Some people move some money from stocks to bonds or other fixed-income investments that provide steady income and less volatility.
  4. Consider inflation
    Prices tend to rise over time. Consider making sure your investments can grow enough to keep up with inflation so your purchasing power doesn’t shrink.
  5. Plan for income needs and liquidity
    Think about how much money you’ll need each year and when you’ll start withdrawing. It may help to keep some investments easy to access for emergencies.
For retirees aged 65-84 who own their own home, singles need about $53,289 per year for a comfortable lifestyle and $34,522 for a modest lifestyle. Couples need about $75,319 for a comfortable lifestyle and $49,992 for a modest lifestyle.
Source: Retirement Standard - ASFA

How investment strategy could change after retirement

Retirement investing focuses more on preserving your savings and generating income, but it’s not just about playing it safe.
  1. Balancing income, stability, and liquidity
    You may want enough income to cover expenses, stability to avoid big losses, and liquidity to handle unexpected costs like healthcare.
  2. Managing ‘sequencing risks’
    The order in which you experience market gains and losses matters. Losing money early in retirement can be costly. Consider complementing your existing retirement income with income that’s not linked to the share market to reduce this risk.
  3. Consider using tax-efficient investments
    Some investments offer tax advantages, such as no tax on earnings in account-based pensions and franking credits from Australian shares. These can boost your income.
  4. Reviewing your plan
    Your needs and the market may change. Consider regularly checking your investments to make sure they still fit your goals and risk tolerance.

Conclusion: embracing a holistic, future-ready approach

Retirement investing today can require more than just picking stocks and bonds. It means understanding that retirement is a long, multi-stage journey shaped by longer lives, changing health and family needs, and new technologies.

By considering reducing risk as you approach retirement, focusing on income and stability during retirement, and planning your estate carefully, you can help ensure your money lasts and supports the lifestyle you want.

As the retirement landscape evolves, collaboration between governments, funds, advisers, and technology providers will look to create better solutions for everyone.

With thoughtful planning and the right tools, you can navigate this new retirement world with confidence.

Contact us about our retirement solutions. Let's talk about how Mercer can help you.

[1] UN, World Population Prospects (2024)

[2] https://www.abs.gov.au/statistics/labour/employment-and-unemployment/retirement-and-retirement-intentions-australia/latest-release

[3] australian-seniors-series-quality-of-life-2022-whitepaper.pdf

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Whilst we offer advice across a range of financial areas, comprehensive financial advice is a tailored approach. This means that most of our client are:

  • People looking to retire.
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  • High income earners, or
  • People with lump sums or savings to invest.

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If you are a member of Mercer Super please visit mercersuper.com.au/financial-advice/ to understand all of your advice options as there may be more advice options available to you. Or, contact the Helpline directly on 1800 682 525 between 8.00am – 7.00pm, Monday to Friday (AEST/AEDT). If you’re calling outside of Australia, please call +61 3 8306 0900.

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