Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 284

Beyond financial solutions for longevity

I appreciated Jeremy Cooper’s recent excellent article on meeting the challenges of longevity risk. Erudite actuaries and investment gurus have long sought investment products which guarantee income for the life of each investor.

While I support efforts to craft better financial products and solutions, we must also make more effort to educate our rapidly-growing older population. There is much they can do to reduce longevity risk themselves. The focus on financial literacy seems to have been most effective at younger ages but not as much beyond midlife. Reallocation of resources into greater longevity awareness is required.

What could be the key elements?

1. Realising that at age 65 (‘retirement age’), over 75% of people are not within three years of the number of years nominated in Life Table expectancies. As shown in the diagram below, there is an enormous range of mortality outcomes, making estimates of how long money will last much less realistic than most people appreciate.

2. Recognising that the rest of their life is likely to play out in three stages: 1) able, 2) less able but still independent, and 3) dependent. Life will be materially different in each stage. For a majority of people at age 65, for example, the able stage is over 10 years, prompting serious consideration of alternatives to stopping paid work too early. This may not be viable as dependency rises.

3. Understanding that the longer they live, the longer they are likely to live, but much of this extra life is likely to be independent. If their prospective lifespan increases, so their dependent phase is likely to reduce.

4. Appreciating that successful ageing is likely to reflect their personal focus on four main issues: 1) exercise, 2) effective social engagement, 3) diet and weight control and 4) appropriate mental challenges.

5. Knowing that indefinite extension of lifespans seems unlikely, but the cost of staying alive will rise to reflect increasingly expensive medical solutions.

6. Accepting that home-based aged care is inevitable for most, and that preparing family and dwellings for this eventuality should be a priority in the able stages of longevity, not when the need becomes evident.

7. Contributing to the debate on assisted dying, recognising the ethical, emotional and financial considerations and expressing a personal view in a way people close to you understand.

8. Factoring in that cognitive issues such as Alzheimer’s disease (now a major factor in the death of older people) appear to reflect earlier life behaviours which many people can address with the hope of deferring the onset.

Averages disguise significant variability

Only 200 years ago, the average baby would not live beyond 40 years old. Babies born today are on average expected to live beyond age 80. Society has made use of this - through better education, communications, infrastructure, laws and governance and greater wealth to invest in living standards. While most people realise this remarkable change is ongoing, few realise what it can mean for them personally.

If we look at a very large group of 65-year-olds in Australia, we know on average how long they will survive. This diagram below shows the percentage of deaths expected in groups of five years. The average survival is 21 years for a 65-year-old. It sits inside the blue column, which represents less than a quarter of the total age group, so the average is not very helpful. At this age, men live about three years less than women.

Success in dealing with longevity risk is more likely to reflect management of the elements outlined above rather than hanging out for financial products which may be a partial solution but will not address the broader opportunities and risks in our longevity for the rest of our lives. People should be empowered to take more control of their personal circumstances, and better education is the key.

David Williams is Founder and CEO of My Longevity. Try the SHAPE Analyser to focus on your own longevity.

RELATED ARTICLES

Are lifetime income streams the answer or just the easy way out?

Ageing in spurts

‘Life expectancy’ – and why I don’t like the expression

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Taxation

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook for residential real estate.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.