About Life expectancy and retirement
You might think retirement means a steady stream of pension money, but that’s not always the case. Here are a few reasons why:
Fewer Defined Benefit (DB) Plans: These plans promise a fixed monthly payment in retirement, but they’re less common in the private sector now across the world. Instead, there are more “Defined Contribution” (DC) plans like the 401(k) in the United States - these are plans where what you contribute to the plan is a fixed amount that you and/or your company define, but the outcome once you reach retirement age will vary depending on the performance of your plan’s investments. (And, if you didn’t know what DB vs DC was before reading this, don’t worry, remember that we are here to help!)
Market Fluctuations: Your retirement income can be affected by market ups and downs. Economic downturns can mess with your savings, and you might end up with less money or even run out.
Longer Life Expectancies: Thanks to better healthcare and lifestyle choices, people are living longer after retirement. That means you’ll need more money to last you through your golden years.
Let’s look a little further into the third point, Longer Life Expectancies:
Last year, my father-in-law, who was 91 and still active as a teacher, shared an eye-opening thought with me. “Carolina, you’re young and have so much life ahead of you! I am twice your age, which means that effectively you have the opportunity to start anew.” This struck me because I realized that, despite reaching my mature years with teenage daughters and over two decades of professional experience, I still have a substantial portion of my life ahead. This “epiphany” brought me both happiness and prompted me to reflect on my preparation for retirement.
Recent data reveals that the global average retirement age, based on OECD member countries, is approximately 64 years old for men and 63.6 old years for women. Assuming a life expectancy similar to my father-in-law’s, I would need to sustain my retirement funds for nearly three decades (yes, 30 years after I retire from my job).
This begs the question: am I adequately prepared for such a scenario? Is my pension plan and asset investment portfolio adequately structured to meet these requirements?
You should not wait to ask yourself these questions and to start understanding your pension plans and investment options. There are various investment strategies and plans tailored to different life stages and risk tolerances. By educating yourself about these strategies, you can make informed decisions that align with your family’s financial goals and enable a secure future.
Carolina Guédez
Ockham Finance founder
