Imagine basing your clients' retirement savings plan on their own individual life expectancy prediction. It's a formula the U.K. is considering for up-and-coming pensioners. But, what would this mean for financial planners?
Imagine you, the advisor, telling a client just how long they are going to live and basing their retirement savings plan on that prediction.
This may become the reality in Britain, according to a government announcement made last month.
British MP Steve Webb - minister of state, pensions and child maintenance - told the Daily Telegraph that the government wants to provide pensioners with a 'rough' life expectancy when they reach retirement age to allow for better financial decisions, including helping them determine exactly how much they need to save.
Webb said that experts will consider factors including gender, where the pensioner lives, lifestyle habits such as smoking etc. to make the age-of-death prediction. He said guidance would be given face-to-face by savings advisors to those willing pensioners.
“This isn’t the government telling them (pensioners) what to do with their own money. But what it is saying is that when they make their own choices, we want to make sure they do it on the basis of full information,” he told the newspaper.
The average life expectancy across the U.K. is rising with women are now projected to live an average of 82.8 years, while men 78.9 years - that’s just shy of Canada’s 83 years for women, and 79 for men, according to Statistics Canada.
With many advisors now recommending Canadians save enough to last them into their 90s, what could life-expectancy financial planning mean for financial advice on this side of the pond?
Well, clients may start contributing less to their RRSPs, or abandoning that retirement savings tool altogether; or perhaps they will decide to tap into their CPP payments at an earlier age, like as early as 60. According to an article published in the Financial Post, a client who is making $50,000 today, and who knows they will die at 70, would only require $165,658 in savings today, whereas an individual who lives until 100 would need $694,532. A significant difference that would signficantly alter how a future retiree views what they can spend now and what they need to tuck away.
How would life-expectancy financial planning affect how you service your clients? And, how do you feel about this type of prediction-based planning?
Tell WP your thoughts in the comment box below.
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This may become the reality in Britain, according to a government announcement made last month.
British MP Steve Webb - minister of state, pensions and child maintenance - told the Daily Telegraph that the government wants to provide pensioners with a 'rough' life expectancy when they reach retirement age to allow for better financial decisions, including helping them determine exactly how much they need to save.
Webb said that experts will consider factors including gender, where the pensioner lives, lifestyle habits such as smoking etc. to make the age-of-death prediction. He said guidance would be given face-to-face by savings advisors to those willing pensioners.
“This isn’t the government telling them (pensioners) what to do with their own money. But what it is saying is that when they make their own choices, we want to make sure they do it on the basis of full information,” he told the newspaper.
The average life expectancy across the U.K. is rising with women are now projected to live an average of 82.8 years, while men 78.9 years - that’s just shy of Canada’s 83 years for women, and 79 for men, according to Statistics Canada.
With many advisors now recommending Canadians save enough to last them into their 90s, what could life-expectancy financial planning mean for financial advice on this side of the pond?
Well, clients may start contributing less to their RRSPs, or abandoning that retirement savings tool altogether; or perhaps they will decide to tap into their CPP payments at an earlier age, like as early as 60. According to an article published in the Financial Post, a client who is making $50,000 today, and who knows they will die at 70, would only require $165,658 in savings today, whereas an individual who lives until 100 would need $694,532. A significant difference that would signficantly alter how a future retiree views what they can spend now and what they need to tuck away.
How would life-expectancy financial planning affect how you service your clients? And, how do you feel about this type of prediction-based planning?
Tell WP your thoughts in the comment box below.
Related Stories:
Canadians are in denial about retirement savings, say advisors
The Canadian dream is a 'myth': Report
