It is ironic that this fear is based on a good thing; living a long life.

That we’ll outlive our savings and not have the funds we need to be comfortable in the last few years of our lives. And it is in those last years when we think we will be most vulnerable and want the assurance of knowing the money is there if we need it. 

We are living an average of seven years longer than people did in the 1960s. This trajectory will continue due to scientific advances in health care, the focus on prevention and due to dangerous activities becoming safer. 

How can our money last as long as we do?

The financial services industry has its best brains trained on the challenge of designing products, investment strategies and longevity calculators to tackle the challenge of longevity risk.

The irony is that many people who do have savings can sometimes die with as much as they started with, not spending their savings, either because of the fear of their savings running out; or because they wanted to leave a bequest for their family.

For those anxious about this issue, some practical things that people can do in the here-and-now to achieve peace of mind are:

1.       Defer drawing down on their retirement savings or draw down at a lesser rate.

2.       Consider retirement income products which are designed to manage longevity risk.

3.       See a financial planner or use a retirement simulator/calculator to take stock of the adequacy of their savings.

Taking stock of our savings and running 'what if' scenarios

The AMP retirement simulator can help people to play around with various lifestyle and financial scenarios and see the results. What if I worked part time? What if I retired a few years later, or earlier? What if I sold the house? The ability to try out different options and see the results can be empowering. 

It can also provide a  check on the level of people's savings. It shows the impact of drawing down a smaller versus a larger income on how long their money could last.

On the last screen, there is the ability to change all the variables including the retirement age. It is for individuals rather than couples, so couples could use it for one person, then the other and add the results together. I found it helpful to bookmark the simulator, play some ‘what if’ scenarios, think about them and go back to later.

How might we defer drawing down our savings or draw down at a lesser rate?

Here are some ideas:

  • Make hay while the sun shines and work while you are able; but in a sustainable way that you enjoy. If you enjoy your job, then that is a great blessing. But if you don’t enjoy your job, it’s not about grinning-and-bearing but rather seeing your possibilities as abundant and exploring options for something else.

  • Work in the on-demand sharing economy. There are now over 110 options. The benefits are flexibility and choice. You can choose work that suits you and work when you like. The variety of work is vast.

  • Turn your hobby into a business. The on-demand sharing economy helps us to do this in low-risk ways. For example; if you enjoy a food related hobby, there are food related platforms that will do the administration and marketing for you so you can focus on the creative part.

A long life is a good thing, it’s what we want for those who we love because we value our relationships with them. So it should be what we want for ourselves. And a bit of planning can help us feel less anxious about the future and enjoy what should be the best years of our lives.   

 

Melinda Livingstone is the founder of IncomeConnection: matching people seeking an income with opportunities to earn an income from the growing on-demand sharing economy. Melinda wrote her thesis on the Future of Superannuation which included a section on longevity risk. Previously; she has 20 years experience in superannuation, investments and financial planning. She writes and speaks on the on-demand sharing economy.