The risks of longer life
The odds of living to a very old age are increasing. Data from Manulife Financial actuaries show that one member in a couple, each of whom is 65, has a 99% chance of living to age 70, a 94% chance of living to 80, a 63% chance of living to 90 and a 36% chance of living to age 95.
What would appear to be a statistical marvel is a financial irony, for inflation can devastate lives as readily as healthy lifestyle choices and modern medicine can sustain them. Further data from Manulife Financial shows that inflation running at just 3% per year will reduce the purchasing power of $1,000 to $739 in 10 years, to $545 in 20 years and to $402 in 30 years.
In financial terms, these are the numbers seniors have to beat.
The dilemma of planning for retirement thus becomes one not just of saving for a life based on goalposts established 10 or 20 years ago, but of keeping up with goalposts that are being pulled upward by science. Today, the risk is growing that those who reach their 90s will live the last years of their lives in poverty.
Additional data show that while life expectancy is growing, the period of freedom from serious illness is also increasing. The process, dubbed "compression of morbidity" by Stanford University School of Medicine professor James F. Fries, means it is increasingly likely the old will be relatively healthy until the last few years of life, when costly illness may take over.
For those planning their financial futures, the phenomenon of extended years of health followed by a relatively few years of serious illness is a challenge. Lee Anne Davies, head of retirement strategies at RBC Royal Bank in Toronto, notes that the group with the longest life expectancy -- women -- are less likely to have saved for their later years than men.
"When we asked, `Are you saving for retirement?` the answer was that women are less active savers. Overall, 32% of persons 18 and over have not started to save for retirement. But 37% of women have not started to save."
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