If we all know exactly how long we would live, would it be helpful?
On the one hand, perhaps we wouldn’t want to know that information for our own emotional wellbeing, and peace of mind. Yet from a financial perspective, knowing our life span would be helpful – since you would then know exactly how much money you need to save for retirement.
Of course, none of us knows exactly how our timelines will play out. It is partly this which leads financial planners to build contingency into financial plans for their clients. After all, you might expect to live to your 80s based on your health, family history and so forth. Yet if you actually end up living into your 90s, you will need more money to carry you through those years.
A financial planner will be able to assist you in preparing for these kinds of scenarios and help you put appropriate financial measures and safeguards in place.
Life expectancy & financial planning
One interesting question is whether or not financial planning can actually affect your lifespan. In other words, could you potentially add more years to your life with a strong financial strategy?
Let’s look at some statistics together. Official records of life expectancy in the UK began in 1982 when the average lifespan was about 74 years. By 2015-17 this had risen to 79.2 years for men and 82.9 years for women, although there is evidence that the rise has now stopped.
There are many reasons why the UK life expectancy has risen over many decades, and now started to plateau and even decline in certain parts of the country. Living standards, public services and lifestyle changes are likely amongst the factors playing a big role.
Yet how can financial planning impact your life expectancy? Looking at it through the lens of “pensioner poverty”, it starts to become clearer how we manage our money and wealth can impact the length of time we have left.
Fullfact.org shows that there is some strong evidence to show that people who are “born poor” in the UK will die 7-9 years earlier than wealthier people. Intuitively, this makes sense. After all, a lower income can lead to poorer health due to factors such as a lack of access to resources, and greater stress levels due to feeling less financially “in control of your life”.
Having a financial plan will not necessarily take you from a low income, immediately to higher one in order to address this. Yet it can help address many of the factors which drag people into poverty in later life and which adversely affect life expectancy. This might include helping you get out of debt, for instance, or build a financial “safety net” to carry you through financial challenges down the line.
One of the key areas which financial planning can help address is poverty in old age – otherwise called “pensioner poverty”. Tragically, as many as 1/6 retired British people in 2018 are living in “poverty”, which AgeUK defines as “not [having] enough to meet [your] basic needs …allow [you] to take part in society.”
Pensioner poverty leads to many heart-breaking stories of retirement lifestyles being harmed and even life expectancies being reduced, with some people being driven to choose between “paying for heating and buying food” during the winter.
Certainly, there’s an important debate which needs to occur about how individuals, government and civil society can rectify this. Yet whilst it is unlikely to be a society-wide panacea, a strong financial plan (made as early as possible) can help ensure that you have the financial resources to ensure that you have what you need in later life.
Financial planning for the future
Imagine you are in your twenties or thirties, just starting out in your career (maybe you are reading this, and this is actually you!). How can you start crafting a personal financial plan which can help look after you and your family, both in the short and long term?
Of course, you likely will want to do everything you can to avoid the possibility of being stuck in poverty during retirement. Almost certainly, you will want to continue your current lifestyle and perhaps even improve it during your “year after work” – living off the fruits of a life’s hard labour.
So at the very least, your financial plan can help your longevity by putting measures in place to ensure that you have enough income to cover your expenses during retirement. That will involve working out how much you are likely to spend on necessities (e.g. housing, travel and bills) as well as luxuries such as holidays abroad.
From there, you will need a plan to ensure you have enough income to meet your needs. This will involve looking at a range of options such as your state pension, workplace pension and other retirement income sources. Here, a financial planner can really help you with doing the sums and making sure you’ve not missed anything important.
Once you’ve added all of this up, do you have enough? If not, how can you start putting aside resources now to help ensure that you attain your desired income in retirement?
You also need to factor in contingencies during your retirement, too. What happens if you need to go into care, for instance- will you have enough to pay the fees? Do you need to think about private health insurance, if you are wanting access to specialist services in later life?
These questions are only barely scratching the surface when it comes to putting a full financial plan together. Yet it is so worthwhile, not just to hopefully help to extend your lifespan, but also to help ensure you attain the quality of life you desire during retirement.
Speak to a member of our team today, to begin a free consultation about how to prepare your own plan for looking after yourself, and your family, during the years and decades ahead.