Are you a Tortoise or a Mayfly?
Did anyone else catch the media coverage of the launch of Ubble last week? Following a study of 500,000 volunteers, Swedish academics have built an online calculator which shows the likelihood of people over 40 dying within the next five years based on responses to a few simple questions.
Granted, for lots of people ignorance is bliss when it comes to such matters, however longevity is a fascinating subject and a very important one when it comes to financial planning and risk management.
One of the interesting things about Ubble is that how you feel about your health is a better predictor of whether you will die within the next five years than more obvious factual ones such as pulse rate, blood pressure or alcohol consumption.
This got me thinking about the financial modelling we do for our clients, what their Ubble ages might be and the assumptions we make around their longevity.
The average life expectancy for a woman in the UK is 83 and 79 for a man (ONS figures). However, we all know averages can be misleading. There are so many factors which go into the mix to get to these numbers, you only have to tweak a few and you can add on years. Wealth, health, environment and lifestyle are all important and despite fears around obesity and lots of media scaremongering, UK longevity continues to rise with an average life expectancy of 90 predicted for those born as early as 2030.
Giant tortoises can live for over 250 years but the poor adult mayfly rarely survives longer than 24 hours.
If you read my post on managing risk last week you will know there is so much more to it than how much your investment portfolio goes up and down. Longevity risk (the risk that you outlive your money) is another one to add to the mix when we think about our role as risk managers. In the new era of pension freedoms when we can access our retirement pot however and whenever we want it, longevity risk is one we expect will become increasingly important.
We plan for our clients to live until age 100 which at first might seem conservative. In our experience people tend to be more worried about dying early, but the evidence shows us the opposite might be just as big a problem. When we consider the demographic and the lives of the people we look after, it seems we might soon need to start building financial plans for an increasing number of centenarians – I certainly hope so.
Why not give it a go and let us know your Ubble age? Our lowest score was Andrew’s 17, despite a broken leg!
If you’d like to talk to us about making your financial plan last as long as you do, we would love to hear from you. Why not get in touch?