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Life expectancy, retirement and the guess work behind your savings – where do you stand?

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If you were born into a society where you had access to good nutrition and healthcare in the year of 1955 – your life expectancy was approximately 66.7 years for males, and 72.7 years for females.

When you reached the age of 23, when you should have ideally been starting to save for your eventual retirement, the life expectancy of those born that year (1977) was already 73.26 years. And as you hit 65 this year, 2020, the life expectancy of an infant arriving into this world now sits at 78.93 years.

So in the years from your birth till your retirement age, human beings have managed to increase longevity by 12.23 more trips around the sun. And the figures only rise the longer you manage to stay alive. If you are already sitting at 65 then your life expectancy now is at 84 for men and 86.5 for women.

Life expectancy is the foundation behind most people’s retirement planning, but the figures are just an average and more than 50% of people will live longer than the years allocated to their age group. Females particularly outlive their male counterparts – up to 5 years longer on average in fact.

Picture: AVIEW Properties

You are advised by good financial planning institutions to add a further 5 to 10 years onto the time your retirement savings pot needs to stretch to cover. Failing to save enough money for another 5 to 10 years is a big problem but up to 10% of the population of your age will actually make it to the age of 90. This is an additional 12 years that you would need to be able to cover with your investments.

Not to mention that the additional years of life are often accompanied by much higher medical expenditure. Women in particular are hardest hit when it comes to saving for retirement. The gender pay gap, career pauses due to child rearing, family responsibilities and caring commitments for older parents often fall on the shoulders of women.

Thus women need to save more of their pre-tax earnings than men. It is estimated that they should be aiming to stash away up to 20% of their monthly pay checks over the 15% common rule of thumb amount advised for men. 80% of men are still married when they depart this earth, whilst 80% of women will pass way whilst single.

Picture: AVIEW Properties

The wives left behind face the prospect of having to live without the benefits of 2 people sharing the living expenses and often with the increased costs of frail care or assisted living. According to the “Just Retirement Insights 2019”, a comprehensive review and commentary based on face-to-face interviews with over 520 South African pre- retirees and retirees, over half (53%) admitted that they had not calculated how much they would need per year and just under half (48%) lacked confidence that their money would last.

How to solve this dilemma:

1. Have you ever used a life expectancy calculator to try and determine where on the life expectancy spectrum your life might fall? There are a few out there that might help to open your eyes to how long you might be around for. Various genetic and lifestyle choices impact the outcomes of your life expectancy and should be considered whilst setting a savings target for your retirement. Here are two easy ones to start with. Canadian Big Life Project: calculator  Living to 100 Life Expectancy Calculator:

2. Look for areas to cut back spending, like dining out, or pursue promotions so you can free up more cash for retirement. There are many choices that can be made to ensure that you don’t become a burden to your children by outliving your funds.

3. Delay your retirement. More often than not your highest earning years occur just before you hit the sixth decade of your life. Carrying on for even 5 or 10 more years pushes up your savings ability, whilst still ensuring that you are leaving your capital that little bit of extra time to allow compounding interest to work its magic.

4. Work part time. If you can ensure that you delay drawing down on your funds for as long as possible whilst working part time, you can have the additional benefit of stimulating your mind whilst ensuring your financial future. A 2013 research report by the French government found that for each additional year of work, you reduce your risk of Dementia by 3.2%.

5. Consider a life rights retirement estate. Life rights estates are gaining in popularity in South Africa. “Life Right developments are ideal for people seeking security of tenure, but without all of the responsibility of full ownership.” Says Gus Van Der Spek from AVIEW property developers, the brains behind the newly-launched Wytham Estate in Cape Town’s Southern Suburbs.

Picture: AVIEW Properties

“Generally the upfront costs are lower than one would pay in a sectional title scheme both in terms of pricing but also taxes – as a Life Right is not subject to any transfer duty or VAT” explains Van der Spek.

“This creates a nice clean transaction to start your stay, after which our clients enjoy the benefit of receiving top class services which are rendered at scale, meaning that the day-to-day costs of living in our development is relatively lower than what they would cost in the outside world.”

Picture: AVIEW Properties

“The long term benefit for the residents at our development, Wytham Estate is having a world class upmarket estate, in the middle of an established suburb, surrounded by all the amenities required for modern day living” continues Van Der Spek. “All of this value is realized while preserving their freedom, to continue living their life life in the best possible way.”

* Sarah Ambler-Smith


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