Question 1: How long will I live and need an income for?
It’s common practice to use government statistics when considering life expectancy. However, there is a danger in being led by averages and defaults. One approach to consider is to position the question in more relatable terms: ‘Might I live longer than expected and, if so, will my income last long enough?
No one likes to think about their death, but when they do, most under-estimate how long they may live. This presents a problem where they live longer than their money.
There are three key factors to help identify a more realistic life expectancy:
Health: What about genetics and family history?
Lifestyle: Although genetics have a major effect on life expectancy; the most important factor is your lifestyle: in particular, smoking, drinking and lack of exercise.
History: Life expectancy is increasing, and each generation is living longer than the last. The average 65 year old man in Singapore is expected to live until the age of 81, and the average woman to 85*.
You could think of retirement income in the terms of pay packets. You could work out how many you are going to get in your working life, and do the same for retirement income until death. Even if you have a realistic assumption in mind about the number of pay packets you may need to generate throughout your retired life, the implications of living longer are a whole different ball game.