A survey conducted by VicSuper suggests around 30 per cent of retirees aged 75 to 79 will outlive their retirement savings. This will rise to around 50 per cent for those who have based their savings on a defensive portfolio.

Younger people are also affected. The research also found 54 per cent of Australia’s pre-retirees (aged 55 and over) are financially unprepared for retirement and only 8 per cent  are completely financially prepared.

“That means they’re already slow off the blocks,” said VicSuper CEO Michael Dundon. Unless people become more aware of the issue and its root causes, the situation is unlikely to improve for the next generation.

Longer lives

One of the primary reasons people are running out of money is simply that they are living longer than ever before.

“We often look to our parents as a guide to how long we can expect to live, but this is no longer an accurate measurement,” Mr Dundon said.

According to the World Health Organisation, a man aged 64 in Australia can expect to live to 85, while a woman of the same age can expect to live to 87. That puts Australia in the top five countries for life expectancy worldwide.

“Whilst we’re able to enjoy this longer life expectancy, the age at which most Australians retire has remained static since the 1950s, at 65 years. This means that we can expect to spend over 20 years of our lives in retirement, longer than any generation before us,” Mr Dundon said.

More active for longer

Retirement expectations are higher. Photo: Getty

As well as living longer and spending more years in retirement, medical advances means people remain physically and socially active longer into retirement than previous generations.

According to an HSBC report covered by Fairfax Media, 45 per cent of people expect their social lives to improve during retirement. They expect to be able to travel, pursue new hobbies, and take time to visit friends and family – things they have been unable to do during their working lives.

VicSuper found 62 per cent of pre-retirees felt that they would still be able to afford Australian holidays during retirement while 40 per cent expected to be able to afford overseas travel. These expectations mean  retirement is becoming increasingly expensive.

Savings are being spent

These changing expectations mean people go through their super savings quicker. At present, the government mandates a minimum amount that retirees must draw down from their superannuation fund each year.

Do your retirement plans have a solid base? Photo: Getty.

While half of retirees live moderately on the minimum draw-down, HSBC’s research shows that half of all retirees are drawing down more than the minimum amount from their super funds each year, dramatically reducing their pool of savings for their future, Mr Dundon said.

“In fact, we Australians are so over-optimistic about our retirement incomes that we have the biggest savings shortfall of all 17 countries that took part in HSBC’s survey,” Mr Dundon said.

“Running out of money in retirement will continue to be a problem for as long as we hold on to our ‘she’ll be right’ attitude to money,” Mr Dundon said.

Annuities can help. Photo: Getty

However, a number of super funds are looking at innovative ways to address the issue. VicSuper and other funds are offering guaranteed income products, or annuities, giving  a guaranteed income during retirement for either a fixed period of time or for the rest of the member’s life.

“While super funds are looking into ways of making the system more sustainable, we all have individual responsibility to start planning for retirement sooner rather than later, researching how long we can expect to live and setting our expectations for our lifestyle during retirement,” Mr Dundon said.

“If we all keep an eye on the long game, there will plenty to be optimistic about for our future.”