“Maybe I just want to fly
I want to live I don’t want to die
Maybe I just want to breath
Maybe I just don’t believe
Maybe you’re the same as me
We see things they’ll never see
You and I are gonna live forever”
When English rock band Oasis wrote the lyrics to Live Forever, it is unlikely that they meant them to be taken in a literal sense.
But with advances in modern medicine, the prospect of living to beyond 100 has become a very real possibility, and feels like an eternity when you’re planning for retirement.
I had the pleasure of attending a breakfast hosted by SuperCentral this morning, where David Williams, founder of web-based business My Longevity, spoke about the risks to advisers and their clients of increasing life expectancy.
According to Williams, the Australian Life Tables used to determine mortality rates do not factor in the increasing survival rate at older ages and are hence a risky foundation for a financial plan.
Furthermore, he says self-managed super fund (SMSF) clients are on average likely to live several years longer than the tables suggest, since they tend to be wealthier, and wealthier people tend to live longer than others.
“Already we are underestimating life expectancy by about 30 per cent,” he says.
“The longevity risk in portfolios is as big as the market downturn we have just had and it’s likely to get worse.”
Females live four years longer than men, on average, and as people get older, the likelihood of dying decreases somewhat, Williams adds.
What are the implications for planners?
Williams says as well as starting with more relevant numbers now, clients should be encouraged to understand that longevity is a moving target – the longer you live, the longer you are likely to live.
Regular review of expected longevity is sensible, and planners would do well to make longevity risk one of the first conversations they have with clients, he says.
Surely it’s an easier conversation to have than insurance? After all, we’re talking about the prospect of living to an old age, not dying at a young one!