KEEP CALM AND DISCUSS DEATH
People are often reluctant to talk about life expectancy, but it is crucial. At the start of the last century a boy could expect to live for 45 years on average and a girl 49 years. One of the outstanding success stories of the 20th century has been the extension of human lifespan.
There are three important areas to consider when discussing this subject with clients:
- The flaw of averages. Most people fail to appreciate the distinction between the average life expectancy for their age group and the probability that they could live much longer. A 65 year old man can expect to live a further 18.5 years and a 65 year old woman nearly 21 years. These are average expected mortality rates, but a 65 year old man has a 50% chance of living to 90 and a 25% chance of living to 96 (the figures for women are 93 and 98 respectively).
- Mind the gap. Research suggests that eight out of ten people over the age of 50 significantly underestimate how long they are likely to live. Men approaching retirement underestimate life expectancy by an average of 6 years; women underestimate life expectancy by an average of 8 years. This tendency can lead people to be too optimistic about how much they can withdraw each year.
- Healthy life expectancy. The spectre of poor health also rears its head at some point. On average, a 65 year old can expect to spend around half of their retirement in poor health. Cognitive ability starts to decline around age 75 and by 85 two thirds of people have a disability or longstanding illness.
In the early stages of poor health, expenditure will probably decrease as people are less likely to socialise or travel so much. As health worsens, significant costs may be incurred particularly if residential care is required.