One of the largest financial fears people face is running out of money before running out of breath. Nobody, by choice, wants to end their days living in extreme poverty.
The problem is, nobody knows what the future holds and increasingly nowadays you don’t have to be an international cricketer to celebrate a century. So, how certain are you that your own financial reserves won’t completely dry up, leaving you thirsting for more?
Telegram from the Queen
More and more people in the UK are living to age 100 and beyond and Wikipedia has a list of British ‘supercentenarians’ who have passed their 110th birthday. Their list of the 100 oldest British people ever has Ethel Wood at 100th place with a remarkable 110 years and 215 days. Could you or someone you know make the top 100?
When we prepare financial life plans for our clients using our Future Map™ technology we always calculate to age 100, despite some client protestations to the contrary that they won’t live that long. What if they do?
Andrew Scott and Lynda Gratton recently published their book on this topic called ‘The 100 Year Life’ and show that during the last century life expectancy in the UK rose by three years per decade. Perhaps the previous ‘three life stages’ model now needs a rethink:
- Birth to age 21 (education)
- 22 to 65 (work and career)
- 66+ (retirement and slippers)
If these longevity trends continue, life will need to change for people, businesses, and governments.
An average working life
Assume an ‘average’ life. We do understand that these averages rarely exist, but let’s go with the flow for now, where the person will change jobs several times, rent, or buy (with a mortgage) several properties over time, start a relationship, and possibly raise a family, save into a pension of some sort (probably after the age of 30), enjoy nice holidays, cars and the like.
This is a period of large financial strain with considerable outflows of money. By their early 60s, many people have accumulated four core financial assets: their cash savings, an investment portfolio (ISAs, company shares, and similar), a pension fund, and the family home. Depending upon individual circumstances there may be a state pension as well.
By planning to age 100 and beyond, there is a real prospect of another 35 to 40 years ahead, all of which need to be paid for if life is to be enjoyed. But is there enough money to provide the income required? It is important to know.
Working for longer
A long, healthy and happy ‘retirement’ period may involve working for longer than you anticipated, accumulating savings and deferring what you want today for what you need tomorrow.
Education and learning skills
By the time you approach the end of working life, school and university days are a dim and distant memory and what you were taught then may be irrelevant. Moore’s Law was formulated in 1965 by the Intel founder, Gordon Moore, and relates to exponential growth in transistor capacity. Microchips and their power is now beyond earlier imagination.
Learning and educational skills needed to be relevant and current. Having those skills in the workplace in later life becomes invaluable.
Family
While we don’t want abject poverty, we also don’t want loneliness (if you are a guru on a remote hilltop, please excuse this section). Friends, family, love, health, and energy are all important to your well-being. Sometimes these don’t come naturally or easily.
A new and different you
Many readers of this blog will have changed jobs and careers, perhaps relocating to the UK, or have even worked or lived abroad. Why not continue making changes in later life? What’s to stop you from delivering great face-to-face advice by Skype or FaceTime from an apartment in Nice?
Investing
Are you, right now, investing in new skills? Keeping fit and healthy? Applying energy to new and existing relationships? Having new experiences? Investing isn’t always about money.
In conclusion
It’s all very well thinking that this won’t happen to you but look around at family and friends. People born in 1947 have a life expectancy of 87. Born in 1977, then it’s 93 and those children born in 2007 can expect to reach age 103. The old-style thinking and behaviours aren’t appropriate anymore. Time for a rethink.
At Capital, we believe in planning for the future and being candid about expectations. Why not check-in?
To speak to a Capital adviser today about financially planning for your hundred-year life, email us at hello@capital.co.uk
