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Private property issue #84 - When will I die?
Why do I need to know my ‘death day’?
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On the podcast this morning, Ed asked: “How long do you think you’ll live?”
I said 78.
Boy, was I wrong.
Why am I talking about dying when this is a newsletter about property?
This newsletter teaches you how to use property to live a comfortable retirement.
To have a good retirement, you need to know how long it will last.
And every retirement calculator will ask you for your "checkout date".
Most of us know when we want to retire. It might be 50, 60, 65, or longer. That’s when retirement starts.
Our ‘death day’ tells us how long our retirement lasts.
You then use that information to figure out how much money you need for a good retirement.
How long you’ll live depends on when you were born and your sex.
Women tend to live longer than men.
And as time goes on, people are living longer.
So, someone born in the year 2000 will likely live longer than someone born in 1950.
Other factors (like lifestyle choices) come into it, too. But here’s how long you might live based on Stats NZ data.
I was born in 1984. So if I reach 65, I have a 50% chance of living to 89.
I also have a 25% chance of making it to 93.
Remember, I told Ed I thought I’d live to 78.
That means there is a good chance I’ll live 11 years longer than I initially thought.
So I may spend 24 years in retirement rather than 13. That’s the good news.
But, it also means there’s an extra 11 years I’ll need to fund in retirement.
So, I may need more money to retire than I first thought.
Don’t worry; most Kiwis underestimate how long they’ll live.
According to one study, men underestimate how long they’ll live by 5 years.
Women underestimate their longevity by 7 years. And that leads to a great question.
If I asked, “how long do you think you’ll live?” How would you figure out the answer?
You might think about how old your parents or grandparents are (or were).
But remember, people are living longer.
You’ll probably live longer than your family members born before you.
The other reason people underestimate this number is ‘life expectancy’.
This is a little figure often quoted in the media and easily found on Google.
It appears to tell us how long we’ll live. But it is misleading.
Right now, life expectancy is:
Those are way lower than many of the numbers in the above table.
That’s because there are 2 things wrong with this number –
#1 – this is the average age of death today.
Sadly, some people die young. This pulls the average ‘life expectancy’ down.
But, if you’re currently 40, you don’t have to worry about the risk of dying at age 33. That risk has already been and gone.
That’s why, as you get older, your life expectancy goes up.
#2 is that we keep living longer.
Life expectancy tells us what age people are dying today.
It doesn’t tell you how long you might live in the future.
So it’s better to use the table above to understand how long you’ll live.
The good (or bad) news is you’ll probably live longer than you think.
That means more time on earth to spend with your family or travel the world.
But it also means that you’ll spend more time in retirement.
So, you may need a bigger retirement fund to live the lifestyle you want.
If you want to run your own numbers, use my retirement calculator here.
Play around with changing your expected age of death. You can see how it impacts the money you’ll need to retire well.
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
