Facts everyone needs to know about life expectancy and planning for it. By Vinita Alvares Fernandes
Right up to the early nineties, living to age eighty was considered a long life. Life expectancy has been increasing over the years and with the increase in knowledge and invention in the fields of science, medicine and technology, we can expect each generation to live longer than the previous one. There is no turning back from this one. What has fallen short of keeping pace with increased life expectancy is the expectations on the money needed to maintain a standard of living for this extended lifespan.
To give you a simple example, an average sixty-five year old who would have retired between the age of sixty to sixty –five expected to live till his or her eighties and made financial retirement plans for medical care and a standard of living accordingly.
Today, the same sixty-five year old will need to stretch the retirement plan almost a decade as life expectancy stretches to the nineties, which is three decades in retirement!
This is challenging indeed, as retirement plans begin pretty early in life.
Understanding your life expectancy is a crucial part of any good retirement plan. No one really knows how long they are going to live, its not an exact science, that’s what makes it so scary. We all hope we live with enough income to get by our retirement years comfortably but most of us are way off the mark. Everyone needs to know some important facts about life expectancy and how to plan wisely for it with a more informed estimate.
The facts —
Estimate how long you will live —
Studies show that both men and women on an average believe they will live to eighty five at the maximum, however the truth is that they will fall short of a couple of years and actually hit the ninety mark. Living just a couple of years longer than you expect, could leave you without enough income for the latter years bringing on stress and depression.
As you age, your life expectancy increases —
What many people do not realise is that life expectancy is not a static number; it changes as you age. Like we know that the survival rate of a heart attack in your late sixties is much more than in your forties or fifties, the body is more seasoned to deal with an ageing heart as it goes into ‘survivor’ instinct mode and increases life expectancy. This trend continues well into your seventies, eighties and nineties too. Improvements in mortality rates are happening over the past twenty-five years, so if you are banking on living only until your early eighties, think twice as you may have another decade of living to fund.
There is only a fifty percent chance that you will stick to your life expectancy plan —
Until recently the age of eighty-five was a convenient estimate of a typical lifespan. Planning a retirement for twenty years and having to stretch that income for thirty years sounds like a deal gone wrong. Financial security is what everyone is looking for post retirement, which is why it is important to overestimate your life expectancy plan rather than underestimate it.
Human tendency is to want a long life —
Whatever might be said, the truth is that you will fight tooth and nail for your life; there is pride in walking in the park with a banner stating you are on the other side of eighty. The prospect of living longer than previous generations makes us happy and this happiness does not need to be short lived if your finances are well prepared.
Are you confident that your savings will outlive you?
This is the biggest nightmare for every retiree. Though it is true that as we age our material wants diminish and the focus is on companionship, friendships and staying healthy. One always thinks that post retirement we will spend less, but the reality is that we spend as much or more than before retirement. It may not be on material things but lifestyle does change, with more free time on hand, one needs to visit the theatre, travel luxuriously, eat out with friends. There is always a possibility of outliving your retirement savings.
Uncertainty needs a safety net — Create a safety net for yourself —
Managing the risk of outliving your savings is the biggest challenge faced by retirees. Even though you may have begun saving from your first pay cheque for retirement. Times change, the world economies change, markets become unpredictable, who knew that we would need to live through a pandemic for three years? This was not included in a retirement plan. Governments are bleeding, payments stalled, balances from funds run out, like they say ’there are no guarantees, there are no alibies.’ Pensions are never enough, so what’s the answer?
You need to have safety net income, an income that will pay your essentials till the age of a hundred whether you clock it or not.
What does your retirement portfolio look like?
Does it have a regular income stream to age hundred?
Is your lifetime income sufficient to take care of personal circumstances?
Do you believe you have calculated your longevity as accurately as possible?
Consult your financial advisor early in life with these questions.
Make yourself aware.
If you are self funded or government funded retiree, keep your pulse on what the budget announces each year for senior citizens that affect your lifestyle positively or negatively.
- Like, discounts on Airfare, public transport, free or reduced medical schemes.
- Rebates on gas, phone bills, electricity, water.
- Fine tune your investments, consolidate and simplify by withdrawing lump sums from schemes and reinvesting in schemes with better rates of interest for seniors, less risk factor and no taxation on interest amounts.
- Down sizing homes, rocketing property prices and government incentives may give you an added lump sum as your safety net.
- Enroll in home care packages, palliative care schemes, it will make your caregivers life much easier to handle.
- The world is now digital, now that’s something of great stress for retirees, enroll in professional platforms to handle your bill payments, online payments, its hard, but trust me once you are set up, you wont want to go back to waiting in queues or call waiting. Its all on your smartphone and as easy as one – two – three. Get set-up, Get peace of mind, It’s worth it.
Nothing stays the same for retirees, understanding your true future living costs and how much will you really need to live on. There is a lot of hard work before you retire to make sure you are a happy retired camper.
Here’s an exercise for you pre retirement —
Take two weeks off work and write a diary stating every single expenditure.
List everything, your fixed bills – phone, electricity, gas, home outgoings, car and petrol expenses, groceries, unexpected expenses, life, travel, luxuries.
This is a snapshot of what life can be like in retirement.
Track your cash flow to see reality, then consider trade offs such as down sizing your home or moving to a smaller town to create a safety net of finances.
The key is to work backwards when planning retirement with life expectancy consideration.
For many, discussing finances does not come easy, it is engrained in us to be secretive, not seek professional help and rely on online information. We need to start having open conversations and get enriched with information on all the possibilities available. Retirement conversations and plans should start early in life, not when there is a medical scare or life scenario such as the pandemic.
If you want your retirement to be about endless holidays, golfing, catching up over glasses of wine
– That your pace will change. “What do I do for ten hours a day?”
– Negotiate with your partner, organise time together and apart, get a game plan. – Support each other, cope with health issues together, accept the reality of ageing, expectations and deal with it with respect.
Good planning affords for a good life – you don’t need to sweat your life expectancy.