According to a new report by the Grattan Institute, retirees are less likely to experience financial stress than working age Australians and are more likely to have funds for optional extras, including holidays.

The report found that, even after taking into consideration inflation, today’s workforce can anticipate a minimum retirement income of 91 per cent of their pre-retirement income. This is significantly higher than the 70 per cent benchmark set by the OECD and will allow future retirees to continue living as they did before retirement.

The institute’s findings suggest that Australian retirees’ spending habits decrease as they age, and their medical costs are predominantly covered by the taxpayer. It also showed that many of those currently in retirement age are net savers and will leave behind an inheritance almost as big as their original nest egg.

Notably, the report proposed that a substantial number of low-income Australians will actually receive a pay rise following their retirement, through a mixture of age pension payments and compulsory superannuation savings.

However, AMP financial planner Tony Rigby warns there are inherent risks associated with relying on the age pension as a source of income in retirement.

Speaking to Nest Egg, Mr Rigby advised future retirees not to include funds from the pension when modelling for retirement.

“Don’t expect social security to be there in another 10 years in the same quantum that it is today, because we just don’t know what the rules will be. We have seen in recent years where the government has increased the asset test for the age pension and they’ve made life a bit tougher for existing retirees. In many instances, there’s been no grandfathering of those changes, so it’s been retrospective to existing age pension recipients,” he said.

“We’ve had a lot of clients lose the age pension or see a big reduction in their age pension. So, for future modelling, we tend to leave those things out and ask, if you didn’t have an age pension, would you have enough funds to retire? And when we do the numbers, a lot of people don’t.”

This has long been the argument of Jeremy Cooper, who chaired the 2010 Super System Review and is Challenger's chair of retirement income. 

Mr Rigby recommended workers take time to consider the potential for long lifespans before completely stepping out of the workforce and into retirement.

“The big question is, is the money going to last as long as them? And we’ve seen with an aging population and with advancements in medical science and medical technology, people are living longer. You need to ask yourself, will you have sufficient assets?” he said.

Instead, Mr Rigby endorses opting for the transition model to retirement, first implemented by the Howard government, which sees those over preservation age access their super through starting an allocated pension while continuing to work part time.

Mr Rigby believes this model can alleviate the risk of relying heavily on the uncertainty of receiving the age pension.

“I like the transition to retirement model and it’s something I often recommend to my clients. We have a number of clients that work past 65, but they’re only working two or three days a week. It provides them mental stimulus, physically going out there, the social aspects and its good for their health and it also takes away some of the financials stress,” he said.

Nestegg readers consider about the cost of savings for retirement.