Do you have enough retirement assets to provide the income required for you and your spouse for the remainder of your lifetimes? The key factor required to answer this question is not based on what you have – but on what your life expectancy could be. In my many years of helping people plan for their retirement, I have found life expectancy to be the most under-estimated calculation of all. Your estimated life expectancy should affect most of the retirement decisions that you will make, financially and lifestyle.
Canadians are living longer and healthier lives. In 1970 life expectancy was age 69 for men and 76 for women. Today it is 79 for men and 83 for women. However let us look at a couple – both age 60 nonsmokers. Their average life expectancy is now 82 for him and 85 for his wife. Remember that is average – 50% of this group will still be alive past those ages.
If this couple is average or better healthwise and financially, the numbers jump again. (We have eliminated approximately 25% of the 60 year olds that have current poor health and finances.) This couple’s average life expectancy is now 89 for him and 93 for his wife. If you add a family history of longevity to this couple, life expectancy for them both enters the late 90’s.
So, what should be your projected life expectancy? Take a moment now to estimate your number. How does it compare to your previous estimate? The good news is that you could be retired for a long time! The bad news is that you could be retired for a long time! Your retirement depends on the choices that you make. Are you reconsidering some of your choices based on your revised life expectancy number?
You could be retired for thirty years or more! If you knew that you would be retired for thirty years, how would you answer the following questions:
- When should I retire?
- Should I stop working completely?
- When should I apply for CPP?
- When should I apply for OAS?
- When do I start RRSP and savings withdrawals?
- How much can I withdraw from my retirement funds?
- How will I fund future health care costs?
- Have I considered the psychological aspects of that long in retirement?
- Does my vision of retirement include the last 5-10 years of my life?
- Could I run out of money?
If you have difficulty picturing yourself living past age 85 – try picturing yourself living past 85 with no money. The average person takes more time and planning for a month long holiday than they do for a possible thirty year retirement.
Please take your possible life expectancy seriously. It is the foundation of your retirement financial plan, and the starting point for many of your key retirement decisions.
Disclaimer: This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see me for individual financial advice based on your personal circumstances.