Hopefully you have had an enjoyable summer break and taken some time to reflect on the good things in life.

Given the hectic pace of the ever changing local and global events, it’s quite easy to lose sight of the big picture. As one approaches or enters retirement, the biggest question of them all must be “How long have I got?”

The traditional method of projecting life expectancy has been designed by life companies and actuaries in order to determine the likely life insurance contracts, and life pensions and annuities.  All of us involved in financial planning have been familiar with life expectancy tables and have largely taken their calculations for granted.  The most recent figures released by the Australian Government Actuary (27.11.2009), forecast female life expectancy to be 84 and male 79 years of age from date of birth.  The longer a person lives, the longer they are expected to live.  So at age 60 a female is expected to live to age 86 and a male to age 83.

Interestingly, a female life expectancy in 1880 was 50 years of age.  Most of the increase has occurred over the past 50 years for obvious reasons of better health, diet and lifestyle.

The significance of ‘Longevity’ has played a major role in Government future planning for incomes in retirement. Provision of income support, accommodation, health and social services for the aging population, is now arguably the most significant task facing our future legislators.

It is also the most important aspect of our work in Retirement Planning.  As the worlds governments grapple with diminishing resources and increasing demands, nowhere is the widening gap more concerning than in the area of social responsibilities towards the aging.  An increasing emphasis on providing for one owns retirement and protecting private wealth for much longer in order to maintain quality of life, is the greatest challenge faced by our clients and therefore us, as your advisers.

This is where the story becomes even more interesting.  The old ‘good-news, bad-news’ adage goes like this.

The good news is that that in many cases,  for residents of Australia, their life expectancy may in fact be significantly longer than what the Government actuary has predicted.  Let’s face it; the average measure of anything is never a good basis for predicting outcomes.  This is particularly the case when forecasting ones own life expectancy.  There are a significant number of variables in each one of our lives, including family history, current health, attitude, lifestyle, wealth, access to resources etc. etc. which go towards determining our longevity (life expectancy).  It is totally acceptable that the Government and life offices need to formulate a population average in order to construct policies and costs, however, the option of using these tables for individual clients in formulating their retirement plans was never a good solution, and could very easily lead to the ‘bad-news’ part of the adage.

Retirees could easily outlive their retirement savings.

Over a past number of years a group of academics has focused on this issue.  They have constructed and tested a model of measuring individual longevity based on personal data rather than group averages.

I would like to refer you to the following site www.mylongevity.com.au and encourage you to access ‘Shape Analyser’ in order to determine your own longevity.  You will find the site interesting and easy to navigate through.  There are no catches and you will not be bombarded with marketing.  I found the content of this survey, and the result most interesting in my own case.  The report also provides you with areas of your own assessment that you may attend to if you wish to improve your chances of living longer and better.  I’m currently negotiating with my self on a number of trade off’s that I may have to attend to.

Please have a go at this analysis and please share with us your results at our next interview.

Good luck,

Rudi Horvat