A new analysis by the Monash Centre for Financial Studies (MCFS) highlights the fragility of retirement outcomes for Australians.
Australia’s superannuation system is designed as the backbone of retirement security, yet the drawdown phase is fraught with uncertainty. Longer life expectancy, rising living costs and market instability mean that many retirees face difficult choices about how to sustain income.
The study, authored by Associate Professor Ummul Ruthbah and Dr Trinh Le from the Monash Business School, used Capital Market Assumptions developed by the Centre, to show that the sustainability of retirement income rests on three factors: the size of the starting balance; the mix of equities and bonds; and the sequence of market returns in the first years of retirement.
The MCFS Capital Market Assumptions incorporate inflation expectations, monetary policy settings and currency dynamics to provide a forward-looking view of returns and risks.
“The findings of the study are sobering,” Associate Professor Ruthbah said.
“Retirees with less than $250,000 face a high likelihood of exhausting their superannuation within a decade if they target a comfortable lifestyle. At balances above about $400,000, the chance of sustaining income rises to near certainty, regardless of portfolio design.”
The analysis also exposes a deeper structural challenge regarding gender gaps and policy implications.
The report states women approaching retirement hold balances 20-30 per cent lower than men, leaving them disproportionately exposed to depletion risk.
