Why retirement planners don’t celebrate birthdays

In the little world of retirement planning, birthdays aren’t that significant (if you are a friend or family and you’re reading this, they are still significant enough for you to buy me a present. I still care about my birthday!). Retirement planners do still pay attention to some birthdays – some odd things happen to your pension when you reach 75, for example.

But, really, the number of years since you were born are less important to us than the number of years until you die (I can assure you that we aren’t always this miserable). We care far more about how much longer your money is going to need to last. Putting a positive spin on it, we are more interested in the future of your money than its past.

We’re fortunate nowadays that the Office for National Statistics provides us with figures about life expectancy. You can pop in your age and sex to an online calculator, and the ONS will tell you when to expect a visit from the Grim Reaper!

What would it looks like if, instead of celebrating birthdays, we “celebrated” years to go?

Average life expectancy in years (ONS figures)Age – maleAge – female

There are a few things that are evident from a table like this:

  • Women would get less frequent “years to go” celebrations than men. That seems like a reasonable trade-off for longer life!
  • The older you get, the longer your life expectancy. There is a simple reason for this – people who have already died aren’t included in the life expectancy tables. But there is a big increase in the sum of your age and your life expectancy, particularly in your 80s.

Of course, the ONS figures are only estimates, and the figures they provide are based on averages. As you get older, the range of life expectancies, which make up the averages, get wider, so an average becomes less useful. The ONS estimates life expectancy for the country as a whole, and there is a correlation between wealth and long life, as well as a correlation between living in the South East and long life (although the latter may well just be confirmation of the former).

Despite this, the ONS figures are a real benefit in putting together your financial plan – not only your retirement income plan, but also your legacy plan. People are usually surprised to find that the averages are on your side for the “7 year inheritance tax clock” until you are 85 (for a woman) or 83 (for a man).

One day, we may be able to get more accurate predictions, taking account of smoking habits and your general health (this is already available in the USA), and maybe then we’ll start sending “20 years to go” cards!

Philip Wise | philip@sussexretirement.co.uk

Managing Director and Chartered Financial Planner

This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The Financial Conduct Authority does not regulate some aspects of Trust, Tax and Estate Planning.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future. 


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