Should you cash in your defined benefit pension? When should you start to transfer assets to your children with an eye to avoiding inheritance tax? How much can you afford to spend so you don’t die with too much and avoid your money running out before your life does?
All questions we as Financial Planners are asked all the time! Sadly, they are almost impossible to answer with any degree of accuracy. However, if we could answer another question – how old will I be when I die? Then we may be able to answer the other questions!
At Henwood Court, we generally assume that all our clients will live to age 100 to receive the telegram from The Queen; this may seem an unlikely life expectancy, but statistics demonstrate that it is possible.
Increased life expectancy was much discussed at The Longevity Forum at the Wellcome Collection last year; some interesting statistics:
- Someone born today has a one-in-three chance of living to 100; those who make it to their 60’s have an excellent chance of living into their 90’s
- A 20-year-old today has a better chance of having a living grandmother than a 20-year-old in 1900 had of having a living mother!
- The Office of National Statistics currently estimates that 10.1% of men and 14.8% of women born in 1981 will live to 100
Many of us are also feeling in remarkably good shape; half of 85-year-olds say they are able to work; but this doesn’t mean you have to for financial reasons!
Having just reached my 50’s, I am relieved to read that the over-50’s no longer act their age; they are apparently down-ageing, acting younger and spending much more than they ever did before.
It seems that the corporate world hasn’t adjusted to this however; try changing your career at 55, or even sticking with your original one past 65! And if we are going to live to 95, why do we stop learning at 18, or even 21 and many never restart?
Emile Ratelband in the Netherlands wanted to change his date of birth to 1969 to be 49 again which he believed would get him both work and a date! Maybe he is right, but has he thought about the consequence of this on not being able to access his pension for another 20 years?
A long life and subsequently a long retirement, bring challenges of their own from a personal financial planning perspective.
Firstly, it means you have to sustain yourself from your retirement ‘nest egg’ of cash savings, investments and pensions. You need to ensure that you draw from this at a sustainable rate so you don’t run the risk of outliving your money.
Secondly, there’s the question of funding long term care. If we live longer, the chance that we will one day need to fund some sort of care increases.
One thing is certain, we are all likely to live longer. We regularly talk to clients about making all the extra years happy and purposeful.
That is why we believe financial planning and cashflow forecasting is so important and integral to the advice we give.
And finally…. most experts agree that the best way to increase the chances that you are one of those who get to enjoy many healthy extra years, the strongest anti-ageing medicine there is – exercise!
Exercise can be as simple as a daily walk, but don’t make this a chore be creative, perhaps one day walk rather than drive or park at the far side of the supermarket car park. All these small things combined will be of benefit, as well as joining the Gym. Gym classes can be great fun and highly social.
So, when you are considering your finances, don’t forget to include an allowance for fitness attire, equipment or gym membership!
If you are reading this on Saturday morning, there may be time for you to get down to your local Parkrun where you can walk, run or jog 5km in a safe environment with others, for enjoyment, and most events have a post-run coffee afterwards!