印刷する Share

Perspective - Economics

How long will you live and what does it mean for your investments?

Latest life expectancy data shows that your money will need to last a lot longer than you might be thinking.

27 August 2019

Duncan Lamont, CFA

Duncan Lamont, CFA

Head of Research and Analytics

Thirty-five years ago, an average 60-year old man could have expected to live an extra 18 years, to age 78. Today, the average 60-year old man should expect to live to 85. That’s according to an easy-to-use life expectancy calculator recently released by the UK’s Office for National Statistics. A 60-year old woman should expect to live longer, to 88.

Most people are aware that we are all living longer. However, you have to remember that the figures often quoted, such as those above, are averages. Some people will live longer, others less. What is less well appreciated is that we all have a pretty good chance of living longer than these averages – a lot longer if you are healthier or wealthier than average.

For example, a 60-year old man now has a 1-in-4 chance of living to 93 and a 1-in-10 chance of reaching 98. Your parents may have bid farewell before clocking 80 but you have a pretty good chance of getting close to 100.

Younger people have even stronger odds. My 2-year old daughter, for example, has an almost 30% chance of living to 100.

The chart below shows how life expectancy varies by age for males – it’s a similar picture for females but all lines are shifted up slightly.

How (male) life expectancy changes over time

Life-expectancy.jpg

Source: ONS, 2019

The observant reader will notice that, once you get into your 90s, your chances of living longer increase pretty sharply – if you live that long you’ve outlived lots of your peers and must be made of strong stuff, so your chances of keeping going a bit longer pick up.

So what does this mean? It means your money has to last a lot longer than you might be thinking.

For a long time, retirement savers have been encouraged to reduce exposure to riskier assets once they enter retirement and move into safer defensive assets, like government bonds. However, such an overly cautious approach will increase the chances that your money runs out while you are still alive.

For many investors, the only way they will have a chance that their money lasts long enough will be by maintaining some exposure to riskier investments, like the stock market, for longer. This will introduce additional variability in the value of a retirement savings account, which may make savers feel uncomfortable at times.

However, risk can be mitigated by spreading investments across a number of asset classes. The alternative, an increased likelihood of outliving one’s savings, is even less palatable.

Perhaps counterintuitively, while excessive risk is dangerous, excessive caution is no better.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.