As financial planners, we are often needing to help clients plan decades into the future. That naturally brings up the question of how long their money will to need to last — or more specifically, how long they expect to live.
Across the industrialised and non-industrialised world, people are living longer and this includes New Zealanders.
For instance, a female child born in New Zealand this year will have an average life expectancy of around 83 years, and a male child, around 80 years. Compare this to a child born in the mid-1950s, who would have had a life expectancy at birth of 73 years (female) or 68 years (male) You can also see from those figures that the gap between men and women is closing.
Over time life expectancy has increased as we push out the maximum age. However, it’s possible there’s only so far that can be pushed. Some think 115 is the maximum. Medical advances, environmental factors and so on, are allowing more of us to live to an older age, but are not necessarily changing that maximum figure itself. This means that more of us will live well into our 80s, 90s, or even past 100, but it doesn’t necessarily mean we’ll all be living to 120 and beyond.
In the first half of the 20th century, when most of the old age social benefits started to emerge, they began to take effect at an age close to or beyond average life expectancy. In many cases, work was hard on the body and retirement wasn’t really a time people looked forward to for the opportunity it offered, as much as a time when the body was no longer capable of doing work.
For many of us now the nature of work itself has changed. We work in ways that stimulate the mind, but less so the body. When we get into our 60s and 70s we might, in fact, be at the top of our job knowledge and capability. Our bodies haven’t worn out - and our jobs don’t tax our bodies in the way they used to, at any rate – and our minds are sharp.
It is a perfectly reasonable situation for someone, in that case, to continue to work and enjoy the purpose that it brings to their life. All of this has a lot of implications for the work we do as financial advisers.
Basing your life expectancy on the age your parents or grandparents lived to might not be as good a guide as it has been in the past.
Many clients want to know that work is optional, but that doesn’t mean they want to stop working as soon as they reach 65. Increasingly, we see that they want the flexibility to enjoy their work. Financial planning is increasingly an exercise of exploring the possibilities, and weighing up the priorities to hit the balance between spending, working and enjoying a life free from financial worry.
Given the change in the types of work done, it’s very likely many reach retirement age with the better part of 30 years ahead of them, with both mind and body in good health. Retirees need to think about how they will enjoy that time in ways that are interesting and fulfilling. This is as important a consideration as the financial side of things.
Overall, what we see is that retirement isn’t the milestone in life it once was. We expect that new careers, community involvement, and impactful philanthropic work will increasingly be the things our clients are talking about in their 60s and 70s.
Our purpose as an adviser is to help you use your wealth to enjoy these years to the fullest. That means offering comprehensive but flexible planning, insuring that you fully understand your choices and guiding you towards the ones that best meet with your values, priorities, and purpose. It also means planning, to the greatest extent possible, for you to be around a while, not only because we hope you are, but because it’s also increasingly likely.1. https://www.stats.govt.nz/topics/life-expectancy2. http://www.nature.com/nature/journal/v538/n7624/full/ nature19793.html
Rob and Mary