Jonathan the giant tortoise (pictured on cover) is more than 170 years old. Virtually blind from cataracts and with no sense of smell, Jonathan is St Helena’s oldest resident. He is believed to be one of the world’s oldest living land animals, with some experts claiming he could reach the age of 250.
In human terms, living this long is impossible to imagine. However, people are living longer today than at any other time and, with continued advancements in medical science and better social and economic environments, this trend of increasing life expectancy is predicted to continue across the globe.
For example, people living in any one of the top 10 countries listed in the CIA World Factbook have a good chance of living beyond 80 years of age (see table). In fact, of the 223 countries listed in the World Factbook, over 50% of them have a respectable average life expectancy of 75 years plus.
Unlike Jonathan, who spends his days relaxing in the grounds of his St Helena residence, we’re probably not going to live to 170 and beyond, but there’s a chance many of us will live well into old age, raising the question of how will we fund our retirement.
The ‘R’ word
Engaging clients in conversation about their retirement plans must be one of the most challenging aspects of any financial adviser’s role. For many of us the ‘R’ word is an alien concept – it’s something that happens to other people, it’s years away, we’ll worry about when it gets closer. But whether you like it or not, one day you’re going to have to accept that having to stop work, or retire, is a reality.
Some will be happy to work into old age, giving them more time to build a nice retirement nest egg. However, what happens if their health fails, forcing them to retire early? As mentioned above, we are all living longer but with that longevity comes a host of potential health issues.
On the other hand, there will be many for whom the idea of an early retirement is top of their wishlist. But if their attitude to life is live for today and don’t worry about tomorrow, they’ll either end up having to work a lot longer than they planned or retirement is going to be a very sobering experience.
Then there’s the question of what to do with all that free time once someone retires. If it’s aspirations of luxury holidays and fine dining then that’s going to come at a price. As the then that’s going to come at a price. As the saying goes, you can’t live a champagne lifestyle on lemonade wages.
Reality bites
No one would disagree that it’s easy to get distracted as a young adult, with buying your first house, getting married, building a career or business and starting a family. All these things take priority over planning for retirement, which seems a long way off when you are in your 20s and 30s. But with age comes wisdom and, for many of us, by the time we enter our 40s we start to realise we really do need to save for our retirement.
If you think about retirement in UK terms, you save into a pension over a period of your working life via National Insurance contributions. That could be from the age of 16 and go all the way up to age 65 or more – a period of 49 years.
Retirement may be decades away for many people, but the reality is that the sooner you start saving for retirement (even a modest amount), the better the chance of a nest egg that will fund a very pleasant retirement.
