Soon-to-be retirees are being warned by the Reserve Bank governor that they face tough times ahead and will need to take risks with their lifesavings to fund their retirement.
Central banks around the world have lowered their interest rates to record lows to stimulate their economies, causing yields on safe investments such as term deposits to fall.
The RBA's Glenn Stevens says that as a result, retirees are have to take more risks with their investments than those in the past in order to generate an adequate future income.
"Those seeking to make that purchase now - that is, those on the brink of leaving the workforce - are in a much worse position than those who made it a decade ago," he told a banking summit on Tuesday.
"They have to accept a lot more risk to generate the expected flow of future income they want."
National Seniors chief executive Michael O'Neill said historically low interest rates had cut the income of some retirees in half in the past couple of years.
But he said that most retirees were coping with low interest rates by cutting back on spending, rather than searching for a better return on their investments.
"The generation that are in that space now are very much savers, who will seek to balance their budget, who will go without rather than allowing themselves to get into difficulties," he said.
"I don't think there will be a flight into riskier investments because there is a very sound appreciation and knowledge of people of that age about risk and they are focused on maintaining their kitty as best they can."
Mr Stevens believes that with yields on investments at their lowest level "ever in human history", it could take a while for interest rates to recover to pre-GFC levels.
"It will be quite an adjustment to get back to that world and it seems to be quite slow in coming," he said.
David Murray, the head of the government's financial system inquiry, said some conservative investors were considering high risk options like shares in order to get a better return.
He said those close to retirement should instead allocate more of their superannuation to fixed income assets, like bonds or term deposits, rather than shares or property, which come with higher risks.
"The most important thing to understand is that as you approach retirement you have to consider very carefully where your asset mix lies because the closer to retirement the more fixed income should be in your portfolio."
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