David Sinclair of Harvard University claims that the first person who will live to 150 has already been born. His thoughts are echoed by scientists at the University of Groningen in the Netherlands and National Geographic, which claims that a child born today will probably live to 120.
Globally, average life expectancy is 71.4 years, according to the World Health Organisation. In South Africa, average life expectancy is 60. Taking into account a modest improvement in longevity, 80% of our clients at MMI will live beyond the age of 80.
Are we prepared for the “grey tsunami”?
Longevity is a risk to your financial wellness, because the longer you live, the greater the chance that other forms of risk will present themselves. Increased longevity means there is more time for a financial crisis to hit and for expensive health problems to manifest themselves.
Many people won’t be able to sustain themselves in their old age. The World Bank states that only 6% of South Africans will be able to sustain their standard of living in retirement. This is a startling number, considering how many people are living longer than they might have expected.
People do not know how long their retirement will last, and thus face a delicate balance between how much they need to save and how much they want to spend. Will you be able to sustain yourself for 30 years in retirement?
In South Africa, women, on average, outlive men by as much as four years. This fact has some serious implications for women in terms of financial planning. The extra four years mean women need to save about 14% more than men. The alternative is for women to work an extra one-and-a-half years to achieve a comparable output.
Many women are already at a disadvantage when providing for their finances. Women often spend less time working than men, because they take time off to have and look after children, which creates a gap in their income and ability to save. There’s also a gender imbalance in average salaries in South Africa.
There are a few options to silence the doom-sayers; all is not lost.
• Start by calculating how much retirement will cost you if you live to 70, 80 or even 100. There are several free online retirement calculators, or, better still, ask a qualified professional to estimate how much you will need.
• The next step is to assess where you are. What do you have in your savings pot? Find out what retirement benefits you could receive from an employer-sponsored fund, a retirement annuity fund or the state.
• Start saving. There are a variety of savings methods to maximise your money. As a rule of thumb, save part of your income before you spend it.
• Invest. It is important to have a view of your entire portfolio to understand your asset allocation. Having a professional by your side is your best bet. He or she will be able to guide you through all your options to ensure that you have a shot at avoiding poverty in old age.
Retirement is not cheap, and you need to plan for longevity. There is a negative attitude towards ageing populations, because it is assumed that, once people turn 65, they automatically stop contributing to the economy and become recipients of benefits. We need to acknowledge that our definition of “old” does not necessarily mean that these people are “finished”. Today’s 65-year-olds may be far more productive than their grandparents were at the same age. But in most countries, including South Africa, the age at which people retire (or are forced to retire) is scarcely a topic of discussion.
Don’t retire until you have to. The age of the “Owls” (older, working less, still earning) is upon us.
Consult your financial adviser, who can help you to select an option that will enable you to attain optimum financial wellness in retirement.
Glenda Vankeirsbilck is the general manager at Momentum Consult, a subsidiary of MMI.