Tag: life expectancy
Wage increases are not proportionate to the astronomical rise in the cost of living. As a result, it is not all that uncommon for some to live “pay cheque to pay cheque” – especially those millennials just beginning their careers, starting a family, and hoping to buy property. Even those who have attended graduate programs (many of whom spend several years paying off the massive debt accrued by such ambitions), have double income earning families, and who hold esteemed positions in the workforce, still struggle to put aside any significant amount of money for retirement. Consequently, many young people make the unwise mistake of counting on their impending inheritance to fund their retirement.
According to Ipsos Reid survey, 35% of Canadians are relying on an inheritance to fund their futures. Although baby boomers as a generation possess great wealth, there are several reasons why that fortune might not land in the hands of millennials.
Firstly, individuals might deplete their assets while still living. Given the steady increase in life expectancy, individuals are living longer and correspondingly, their wealth must last longer. For some, this might mean living lavishly in their retirement years and travelling the world. Others who aren’t so lucky might be plagued by illness requiring extensive care. In the latter scenario, savings can be quickly consumed by these unforeseen health care expenses. For context, a private room at a long-term care home in Ontario costs on average $2,640 a month. Retirement homes, not subsidized by the government, cost approximately $3,204 a month if an individual requires assistance.
Another reason why an inheritance should not be counted until it is received is due to the volatility of the stock market. An unexpected downturn in the stock market, or a poor investing decision, could result in a retirement portfolio plummeting and thus no inheritance left to pass along.
Lastly, some parents might share the same beliefs as investing icon Warren Buffett, who infamously remarked that he would leave his children “enough money so that they would feel they could do anything, but not so much that they could do nothing.” A 2014 study by the Insured Retirement Institute confirmed that although in the past over two-thirds of baby boomers reported that they would leave their children an inheritance, this number dropped to just 46% in 2014. It appears that more parents might agree with Buffet’s philosophy than expected. As a result, it seems wise to consider your potential inheritance as a welcome bonus rather than a given.
Thanks for reading – and enjoy the rest of your day!
Suzana Popovic-Montag & Tori Joseph
A lot can change in 100 years. In 1920, the life expectancy at birth for the average Canadian male was 59 years – and only 61 years for women. Fast forward to today and the numbers are remarkably different – nearly 80 years for men and 84 years for women.
And those are just averages. According to the federal government, a 50-year-old man today has a 37.5% chance of living to age 90, and a 50-year-old woman has a 48.8% chance, nearly one in two. Want to know your odds of living to 100? Check out Table 16 here: http://www.osfi-bsif.gc.ca/Eng/oca-bac/as-ea/Pages/mpsspc.aspx#TBL14.
What does it all mean? Well, you could live long enough to see the Toronto Maple Leafs win the cup after all; but, more importantly, it means you need to plan your finances to last a much longer time than generations past. Here are four tips to consider as you make your plans:
- Don’t save it all in one basket: While it can be cost-efficient and convenient to deal with one financial institution, within that one institution, aim to have a mix of investment accounts. Ideally, you’ll have a combination – registered retirement savings plan (RRSP), tax-free savings account (TFSA) and a non-registered account. Because tax and withdrawal rules differ between account types, the mix gives you maximum planning flexibility to manage your income distribution in retirement.
- Invest for growth: Many people will now spend more years in retirement than they did in their careers. With many retirements now spanning 30 years or longer, the need for equity investments in a retirement portfolio can be more important than ever. Yes, equities carry substantially short-term risks, but the higher long-term returns they generate can extend the life of a portfolio and help offset the impact of inflation.
- Consider alternative products: In addition to your investment savings, it pays to explore other products that can help you achieve your financial goals for retirement. For example, permanent life insurance has a cash value that can supplement retirement income and provide a legacy for family members, or cover estate tax liabilities. And life annuities – while not providing income flexibility – offer the benefit that those living into their 90s and beyond love: guaranteed income for as long as you live. Both products are worth discussing with your financial advisor.
- Delay the start of your government benefits: Government benefits – like those from the Canada/Quebec pension plan and Old Age Security (which is only paid in whole or part to those with annual incomes below about $120,000) – are both inflation-protected and, more importantly, paid for life. And if you can afford to delay receiving these benefits until age 70, you’ll get a much bigger payout.
For example, if you start receiving your CPP retirement pension at the age of 70, your pension amount will be 42% more than it would have been if you had taken it at 65. And if you delay receiving your Old Age Security pension to age 70, your monthly pension payment will be 36% more than it would have been at age 65. While these two benefits may not represent huge payouts in the early years of your retirement, they can be an important guaranteed income stream in your later years, when other assets may have been depleted but the need for income remains.
And if you want to make age 100 your goal, BMO outlines some strategies to get you there: https://www.bmo.com/assets/pdfs/gam/BMO-Report-Living-to-100-en.pdf.
Happy living, and thank you for reading!
Life expectancy has unsurprisingly been on the rise over the course of the last several decades. You would think with the superior quality of life many currently experience that there is hope for more people to live up to 100 and beyond. After all, the Guinness World Record for the longest living person is held by Jeanne Calment, who died in 1997 at age 122!
However, Ms. Calment’s status as a supercentenarian is a rarity. Even more exceptional is her living into her 120s. No one else has been verified as doing so. Further, it was recently reported that researchers calculate 115 to likely be the maximum life-span. Without a breakthrough that fixes age-related problems, the new research apparently indicates that living beyond this age is not probable.
Some geneticists disagree, taking the view that as there has been success in extending the life and health of certain laboratory animals, the same may be achievable for humans. With technological advances may come innovations that will meaningfully impact longevity.
The debate about whether this is achievable is expected to continue. Nonetheless, we know that people are generally living longer and, coupled with this, will have more pressure on their financial resources, as well as the increased likelihood of mental decline. So I believe it to be prudent to encourage our clients to seek the appropriate professional advice on how to plan for a longer retirement or an extended work-life, as well as for coping with cognitive impairment. Some suggestions with respect to the latter include:
- appoint your Powers of Attorney(s);
- make a Will;
- designate beneficiaries on your bank and investment accounts;
- have life insurance in place;
- simplifying your finances (e.g. consolidate accounts);
- create an inventory of assets; and
- perhaps most important, communicate with your family.
Thanks for reading and have a great weekend,
An article I posted on Twitter yesterday asked the question, “Is a financial plan enough?” The article raises the importance of what the author calls “longevity planning.” Longevity planning means providing financial advice that addresses the lifestyle changes that come with longer life expectancy. For example, if you want to stay in your home indefinitely, will it need to be modified for aging? How will you get the care you need as you age? What transportation options are available in your area? Longevity planning involves preparation for accommodations that may be needed to maintain a high quality of life as individuals can expect to live longer.
Longevity planning shares some similarities with a Power of Attorney for Personal Care (“POA PC”). First, a POA PC addresses some of the same issues, such as health care, nutrition, shelter, clothing, hygiene and safety. Second, a POA PC may include a plan in the form of instructions. For example, the person who gives the POA PC may have strong feelings about where they want to live, or under what conditions they would consent to certain kinds of medical treatment. If instructions are written in a POA PC, the attorney must follow those instructions unless it is impossible to do so.
If the POA PC does not include any specific instructions, or if the instructions don’t apply to the decision that must be made, the attorney must try to find out if the person expressed any other wishes when they were mentally capable. Those wishes could have been spoken or written down in another place. The attorney’s decisions must be based on those wishes, unless it is impossible to do so.
If the person did not express specific wishes, or if it is impossible to carry them out, the attorney must make a decision that is in the person’s best interests. In deciding what those best interests are, the attorney must consider, among other things, whether the decision is likely to improve the incapable person’s quality of life or prevent it from becoming worse.
Thus, third, a POA PC, in part, addresses quality of life concerns. Financial plans and estate plans have traditionally focused on numbers—such as the amount of money one wants to have when they retire or on the distribution of assets. But such planning can ignore the factors that are fundamental to your own and your loved ones’ peace of mind. As important as it is not to procrastinate in one’s estate planning, it is equally important to incorporate quality of life planning as a central element in one’s overall estate plan.
Thank you for reading.
BBC News recently commented on a study published in the Lancet journal that shows more than half the babies now born in the UK and other wealthy nations will live to be 100 years old. The data from the study indicates that these extra years would be spent with less serious disabilities for the elderly.
The researchers, from the Danish Aging Research Center, refer to “four ages of man”-child, adult, young old age and old old age. Surprisingly, there was little evidence that those who belonged in the old old age group were unhealthier that those in the young old age group likely because the frailest elderly died first leaving the more robust to survive past the age of 85. Danish and American studies show that about 30%-40% of those falling into the old old group live independently.
Of course, such a development requires countries to reform their health-care services, employment practices, and care services. In the U.K., with an election looming, the Tory party has promised a Home Protection Plan that would allow people at the age of 65 to make a one time payment plan of £8,000 pounds in exchange for free full-time residential care in later life. This proposed policy addresses the issue of the elderly having to sell their houses in exchange for funding care giving services.
A significant longer life expectancy requires careful retirement and estate planning. If this trend towards increased life expectancy continues, long standing assumptions will have to be altered.
Thanks for reading,
Diane Vieira – Click here for more inforamtion on Diane Vieira.
Comparisons of life expectancy across different regions of Canada suggest that Southern, Urban dwellers in mid-size cities tend to live the longest. Northern groups, particularly those with large aboriginal segments, tend to face a much grimmer situation, according to this 2000 article,living approximately 4 years less on average.
Some encouraging news is that the country’s average life expectancy continues to rise. Of particular interest to me: men are approaching women in terms of life expectancy, although we’re not quite there yet. As against the rest of the world, Canada just barely cracks the top ten according to Wikipedia with an average life expectancy of 80.34, trailing number 1 Andorra’s (Andorra – who knew?) average lifespan of 83.52 years. Swazilanders, with an average lifespan of 39.6 years, have the terrible distinction of being at the bottom of the list.
Women apparently live longer than men in every region except South Asia.
As would be expected, there seems to be an obvious and very strong correlation between level of industrialization and overall wealth and longer lifespan.
Are you feeling optimistic? Try this Life Expectancy Test to get a sense of the factors affecting you.
Thanks for reading.