Financial planning for longer life expectancy and higher retirement ages.

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We plan our finances to achieve financial independence. We hope to have enough wealth to retire comfortably. However, will we have enough wealth for a comfortable retirement, considering that we will have longer life expectancy? Will our wealth be sufficient to cover expenses incurred within the gap between higher retirement ages and longer life expectancy? Our financial plans should take into consideration longer life expectancy and higher retirement ages.

Life expectancy is rising in much parts of the world due to improving healthcare, better nutrition, and higher standards of living. According to the United Nations World Population Prospects 2019: Highlights report, life expectancy at birth for the world’s population reached 72.6 years in 2019, an improvement of more than 8 years since 1990. Further improvements in survival are projected to result in an average length of life globally of around 77.1 years in 2050.

Improvements in survival are expected to continue in all regions such that in 2050 the average length of life is projected to have increased to 77.1 years globally. Of the eight Sustainable Development Goals (SDG) regions, life expectancy at birth is highest in Australia/New Zealand, at 83.2 years in 2019, and it is expected to increase further to 87.1 in 2050. With a projected gain of 7.4 years between 2019 and 2050, when it could reach 68.5 years, sub-Saharan Africa has the largest expected improvement to the life expectancy at birth among the eight SDG regions. Across all countries and regions, projected gains in life expectancy are contingent on continued progress in the prevention and treatment of diseases that cause mortality, including HIV/AIDS and other infectious and noncommunicable diseases, as well as the absence of catastrophic events, such as war or major epidemics of fatal diseases.

A United Nations report indicated that the proportion of older persons in the world population is expected to increase from 12 per cent in 2015 to 21 per cent by 2050. As the population grows older, all countries will need to find a balance between ensuring the adequacy of pension benefits and the long-term sustainability of pension systems. Very generous pensions may not be sustainable. Benefit costs and means of financing must be regularly monitored to ensure that pensionable age and benefits are adjusted as life expectancy increases. At the same time, insufficient coverage and inadequate benefits will jeopardize the well-being of older persons. They may even undermine the future capacity of the State to support pension systems: if pensions are perceived to be ineffective and unfair, citizens may not be willing to contribute to pension schemes during their working lives. The commitment to leave no one behind means safeguarding or strengthening the poverty-reducing role of social pensions, even under reforms to cut overall pension costs.

In recent decades, many developed and some developing countries have reformed pension systems in order to strengthen their long-term sustainability. Some countries have raised the statutory pensionable age and cut early-retirement provisions; others have reduced benefits for future retirees—mostly through changes in benefit indexation—or increased contribution rates. Many countries are increasingly relying on defined-contribution pension plans, in which benefits depend on the level of savings accumulated by the pensioner, while reliance on defined-benefit plans that provide minimum-income guarantees has been declining. The fiscal consolidation efforts that followed the financial crisis of 2008 accelerated drastic cost-saving measures in pension systems.

Our savings in pension funds may not be sufficient for us to have a comfortable life. Therefore, as we live longer, it is important for us to ensure that we have enough wealth to lead a comfortable retirement life. At Aplex V.A. Limited, we help our clients to build their wealth by offering a wide range of investment services in various asset classes and help to manage their retirement plan. Do you need professional assistance in developing your retirement plan? Now is the best time to invest for a brighter future! Prepare for better times, by letting us, Aplex V.A. Limited, to become your partner that can guide your financial decisions in years to come.

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