If you knew that you were going to live to 100, how would you approach your finances?
On the Money: A long life may be priceless, but it's costly
Life expectancy plays a big part in financial planning. If we don't save enough for our retirement, then clearly we are not going to have enough money to live comfortably in our so-called golden years. This would mean no money to while away endless days at the golf course in the guise of some gentle exercise or to hit the high seas for that cruise of a lifetime. Worse, the dream of most baby boomers today would be shattered: they won't be able to fritter away their children's inheritance because they won't have enough money to cover even the basics.
Why the cheery subject of mortality? I received a couple of interesting factoids this week.
1. A child born in the UK today has a 30 per cent chance of living to 100.
2. A 65-year-old in the UK today has a 15 per cent chance of hitting their centenary.
Unfortunately, these factoids are a little too UK-centric, but they did come via the Fry Group, a London-based financial services firm.
I'm not saying that it's true that so many of us will live to see 100 candles on our birthday cakes. And, if the truth be known, I purposely used the word "factoid" rather than fact. Why? According to the Oxford English Dictionary (OED) factoid is "an item of unreliable information that is repeated so often that it becomes accepted as fact".
Interestingly, the OED says that factoid in North America means "a brief or trivial item of information".
Anyway, life expectancy is a bit of a gamble, don't you think? I mean, how can you accurately calculate how many years you expect to live after you retire? Sure, you can average it out, but we will always be hindered by the unshakable fact that none of us will ever be able to see into the future.
There are a few websites out there that claim they can, offering to kindly calculate how long you'll live based on your lifestyle choices, such as whether or not you are a smoker, your exercise habits and medical history. But I'm not volunteering to try these out for the sake of my argument because I don't want to know how long I have left to live. And for all I know, they could be feeding me a factoid and I'll repeat it so often to myself that I'll start to believe it. Better to live in ignorance, I say.
Thanks to advanced medical technology and our cushy lifestyles, we are living a lot longer as opposed to, say, the folks from the Upper Palaeolithic period, or Late Stone Age. This era spanned 40,000 years to 10,000 years ago, a time when woolly mammoths still roamed the Earth and the average life expectancy was the ripe old age of 30. But with only the most primitive of tools to aid their hunter-gatherer lifestyles, I guess 30 was considered a pretty good innings.
Their 21st-century cousins might be living longer, but can they afford it?
Once upon a time, growing old was all about ageing gracefully, polite speak for somebody who'd chosen not to go under the knife à la the likes of Joan Collins and her cronies.
These days, it's all about saving for the future and stressing if there's enough left over to keep up with the Joneses, like keeping the wrinkles at bay with a spot of non-invasive, but oh so addictive, surgery, retaining a decent standard of living and taking the occasional holiday.
But if you knew that you were going to live to 100, how would you approach your finances? Pity the poor 65 year olds in the UK, 15 per cent of whom are supposedly expected to reach 100. I'm sure many only banked on living to maybe 85 or so. What happens for the last 15 years of their lives, when they are down to their last fil?
The global financial crisis wiped billions off global retirement funds, leaving millions of baby boomers - the next in line for retirement - financially stripped when it comes to their golden years. And it's not like they can rely on their cash-strapped western governments to help them out, with many already raising the official retirement age because they can't afford for their citizens to retire on time.
For the first time, I'm not worried about the children born today, even if 30 per cent of them may live to 100. They've got plenty of time to get their financial futures on track. It's those 65 year olds in the 15 percentile band who have me worried. Nobody said that growing old would be easy. That said, life is priceless - and we should approach our savings in the same way. After all, we deserve the best.