The chances of living to 100 are increasing and this has important implications for financial planning
The other day, I was idly wondering how long I was likely to live – and the implications for my work, finances and family life.
What prompted this terminal thinking was reading a book on holiday called The 100-Year Life: Living and Working in an Age of Longevity by Lynda Gratton and Andrew Scott.
The authors both teach at the London Business School – Gratton specialises in management practice, psychology and HR, while Scott is a distinguished economist looking at finance, industry and investment.
Financial planning is predicated on helping clients to ponder their long-term futures. Reading The 100-Year Life is one of the most practical and inspiring ways to think about the disturbing and exciting implications of increased longevity.
The longevity threat – or opportunity – is very real. My 11-year-old granddaughter has a 50 per cent chance of living to age 100, along with the rest of her cohort in the UK. Children in most western countries have similar expectations. In contrast, people who were born over a century ago had less than a 1 per cent chance of living to the age of 100.
With life expectancy growing fast – despite the recent setbacks – we can look forward to very different patterns of life from those of previous generations. Scott and Gratton explore what that means for education, career planning, physical and mental wellbeing, relationships and, of course, pensions, savings and finances.
The book states: “The simple truth is that if you live for longer then you will need more money. This means either saving more or working for longer.”
So, someone saving 10 per cent of their income each year will have to work into their 80s just to provide a pension of half their final earnings for a 100-year life.
Scott and Gratton argue that we need to rethink the patterns of our lives to be able to work longer. Our natural instinct is to copy what our parents did and how they lived. But for the most part previous generations lived three-stage lives and until recently the final stage was often quite short.
The three-stage life of education followed by work and ending up in retirement is no longer viable for the 100-year life, especially if the aim is to work for about 40 years and retire in one’s 60s. Very few societies or their members can afford to work for about 40 years and save enough to retire for another 40 years. So, what are the secrets of a successful 100-year life?
We need to stop thinking in terms of the old three stages and start to adapt to a new multi-stage life. If we stick with the three-stage model we will have to stretch the working stage so long that it will become too hard, too exhausting and, quite frankly, too boring.
Instead people will have multi-stage lives, with different careers, at some stages possibly focusing on hard work and long hours and at others looking for more of a work/leisure/education balance. We will need to be prepared for multiple periods of transition from one stage to another, to focus on new networks, knowledge and skills.
Multi-stage lives will not just require us to build financial resilience, but it will need us to invest in building networks of family and friends ready and able to help during periods of transition.
Traditionally a person’s age has set their life stage but increasingly the links will be broken. I could be an undergraduate and nobody would be able to make a reliable prediction of my age just from this item of information. Education in the future can and should be something people do at all and any ages.
The implications for society are profound – relationships will become even more complicated; status and identity will be less certain and some people will cope with the need for flexibility and lifelong learning better than others.
But it isn’t just my grandchildren and her friends who have to contend with the challenges of longevity. Someone in their mid-50s now has roughly a 20 per cent chance of reaching 100.
If you want to have a personalised assessment using medical underwriting and actuarial techniques for yourself or a client, get in touch with MorganAsh who will do this for a modest fee. It focuses the mind wonderfully.
Most of us should already be planning for the possibility of a 100-year life. I am – only 27 years to go.
Danby Bloch is chairman of Helm Godfrey and consultant at Platforum