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Opinion: You are likely to be retired for a long time

Posted in News

By Neville Bennett

New Zealand is about to experience a massive wave of baby boomer retirements.

Technically, baby boomers are people born after 1945, the product of people wanting to build a new peaceful life. In the USA baby boomers were born 1945-1964, but it is sometimes argued that the large birth bulge lasted longer in NZ, up to about 1973 when birth-rates began to dive.

Then Prime Minister Bill Rowling, incidentally, recognised that a falling birthrate was a problem and proposed a "baby bonus" for the 1975 election. He was ridiculed and swept away by Rob Muldoon who campaigned for retirement at 60 "” a very successful election bribe.

As they retire, many boomers will ask "How long will I live?" because they want to plan to prevent their money running out before they die.

I think most of them will live longer than they think, so they should get very serious about their finances.

Most people will remember the biblical "three score and ten" and, although "score" has dropped out of the vocabulary, will remember that is a life expectancy of 70. It has been a good rule of thumb but expectancy has increased considerably in the last few years, especially for men. The latest release from Statistics New Zealand, who have just released Life-Tables for 2005-7, is that a girl born today can expect to live for 82.2 year and a baby boy 78 years.

Does that mean that a bloke retiring at 65 has an average of about 13 more years to live, and a 65-year old woman another 17 years? No it does not! It is as if this information is a death sentence. People commonly assume they will get to the age of 80 at best, and then peg out.

Let's start getting deeper by realising that life expectancy from birth is not really relevant for people aged 65. That calculation includes people who die before 65 (of disease, in childhood, teenage exploits, falling off ladders or in car crashes etc). This requires data supplied in a life table.

The last life table available was the one composed for 2000-2, so I have been champing at the bit for the 2005-7 which was released last week.

Table 1.
Life expectancy 2005-2007

.............. Current ..... years of life ........your
.................. age ....... expectancy ...... expectancy

Women ...... 65 ............ 20.62 ............. 85
Men ........... 65 ............ 17.95 ............. 83

Source: Statistic NZ

Looking at this table, most people will assume that men will die at the age of 83 and women will die at the age of 85. The assumption is that most men and women will be dead at these ages. Wrong! The truth is that you have a 50/50 chance of dying at that age.

Put in another way, Table 1. indicates that women at the age of 65 can expect an average of 20 years more life. Some will die within a year at the age of 66. Others will live for another 40 years, until 105. So the average age of death of 85 is neither a minimum nor a maximum: it is an average age of death for people who have already survived until the age of 65.

Indeed, quite a few people will survive to 85. A man who has lived to 85, (using 2005-7 data) could live on average another 5.6 years. So his life expectancy is 90.6. But he could well live longer. If he survives to the age of 90, he will not have expectancy of 0.2 years but of 3.9 years. Women, who attain 85, have a life expectancy of 91.6, but an expectancy of 94.4 if they get to age 90.

But these figures are likely to be too pessimistic. I confidently predict longer lives than the statistics at present indicate. There is constant movement in the mortality tables.

People are living longer because of better medicine, nutrition, fitness and safety. There have been positive movements in the last decades. Men aged 65, had an average of another 12.8 years from 1950-1975, but their expectancy increased another 4 years 1975-2002, to 16.7. Women added another 3.4 years after 1975.

There has been a huge change from 2000-02 to 2005-07; women added another year to their life expectancy, while men added more: a huge 1.7 years.

For the last 30 years, life expectancy for men has increased faster than for women. In 1975, a women's average life expectancy was 6.4 years longer than men; the gap has narrowed to 4.1 years now. If this trend continues, boys born now will have a life expectancy equal to girls.

As expectancy grows, it follows that people consulting a life table in 1975, might under-estimate their expectancy by around 4 years. As medicine, nutrition, safety etc are still improving, I am going to make an assumption that life expectancies will improve by as much in the next 30 years as they did in the last. This is very rough science. At best I will arrive at a ball-park figure that may not be wildly wrong. I apologise now to the actuaries who suffer from apoplexy in indignation of my willful trespass on their turf.

Table 2 Estimated lives

.............. Current ..... years of life ........your
.................. age ....... expectancy ...... expectancy

Women ...... 65 ............ 23.4 ............. 88.4
Men ........... 65 ............ 20.7 ............. 85.7

The assumption is that on average life expectancy will increase by 4 years for those people currently aged about 60. That is a significant length of time if you are in penury.

These figures are for all males and females. The only ethnic group that has separate statistics is Maori who have about 4 years less expectancy. Incidentally, life expectancy does not always increase: it fell in the 1960's, perhaps due mostly to tobacco, whose consumption peaked in 1963. It could fall again, as many of the younger generation are more obese than the boomers, and there is always the danger of disease that does not respond to antibiotics: a real fear with TB.

So how many years should I regard as likely to be my lifespan?

Obviously, it is almost impossible to answer this question with any degree of accuracy. It is a difficult equation that does not just depend on the medicine, nutrition, safety that we have already discussed. There are added complications of ethnicity, and perhaps poorly understood ones of genetics. Even the region of your residence is worth a few months, either way.

The government statistician cannot deal with small numbers. Discussion of population is usually done in groups of 100,000. The current abridged life table indicates that of every 100,000 males, 85,000 are still alive at 65. Thus 85% of the group is alive at age 65, and they have an average expectancy of 82.5. But a male has a 55% chance of reaching 80, and an amazing 37% of reaching 85! At 85, a survivor has an average chance of another 5.6 years. If you attain 85, you have a sporting chance of becoming 95. At present, the life table shows that 18,172 males per 100,000 (18.1%) get to 90. Put in another way about a fifth of the men who get to 65 will get to 90.

As I compute these figures I am aware of a great change since 2002, men have added about 2% to their chances of a longer life! I will say no more for fear of inducing apoplexy in statisticians.

The table indicates that 90,600 women per 100,000 attain 65, and their expectancy is 85.6 years. But women have a 66% chance of reaching 80, and 30,500 or 30% get to 90. About a third of the women who attain 65, will get to 90, they will then average another 4.4 years.

My searches did not result in better actuarial tables but I believe there is about a 10% chance that women, who get to 65, will live to be a hundred.

This theme suggests that increased longevity ought to influence investment plans:

"¢ Postpone your retirement for a few years. Some extra saving is necessary
"¢ Work part time when possible, it will either help with saving or slow down the consumption of your savings.

Remember that you are likely to be retired for a very long time. Conventional wisdom is that you invest for income. This usually means that your capital will not grow. But when the growth cycle is at a low point, it is sometimes appropriate to invest for growth. I hope to write more for the retired on investment and also explore rather difficult data that is emerging on how long we can expect to lead a healthy, independent life, and how many years of dependency are usual.

* Neville Bennett was a long-time Senior Lecturer in History at the University of Canterbury, where he taught since 1971. His focus is economic history and markets.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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This is very interesting and

This is very interesting and has several implications:

1. John Key is wrong to rule out raising the retirement age.
2. There should be a website where I can put in my current age and other relevant data, and find out my average life expectancy?
3. Investment structures with declining value (eg reverse mortgages, some retirement village schemes) need careful scrutiny concerning what happens if the customer lives much longer than anticipated.

Is there an answer to #2? Or somewhere I can view the "life tables"?

Hi David Many calculators on

Hi David

Many calculators on the web of the sort you are looking for. Here's one;

here is a link to

here is a link to a variety of tables:

And there's more! Not a

And there's more! Not a set of steak knives, in fact steak recedes further from senior menus when you think of how many McMansions, Southforks and other urban and rural palaces will all hit the property market at the same time.
The retirement myth is sad enough, even sadder is going to be all the boomers trying to cash up and out of the property market at the same time.
We are looking at a new sub demographic of sulky seniors stuck in hideously expensive to heat McMansions wondering just why the script they were sold has turned out so totally wrong.
The whole ageing model we accept as the backdrop to discourse in this country is out of date, acturially, factually, medically and socially.
Nice to see Neville stir the pot, thought I might just try and help it simmer.l

@ mr ruru - "The

@ mr ruru - "The retirement myth is sad enough, even sadder is going to be all the boomers trying to cash up and out of the property market at the same time."

Yes, and those that choose to hang on, with limited income, will be stung by ever increasing Council Rates and as you allude to - massive heating bills. There are so many potential outcomes of the impending mass retirement of the BBs.......

Very good article Neville. I

Very good article Neville. I believe that it reinforces Bernard's recent article about inter-generational warfare. There is no way that the majority of baby boomers in NZ will have enough savings to last 20+ years in retirement (unless they find a way of eating their houses). Equally there is no way that Gens X & Y will agree to pay for it via increased taxation.

The so called death panels that they are speculating about in the US at present could very well become a reality in NZ in the not too distant future.

Isn't that the point of

Isn't that the point of reverse mortgages , so that you can access its value , to use in your retirement . Ergo , you can " eat your house " .

Yessir we have to save

Yessir we have to save to the grave because that way the thieving govt will get it's hands on our stash and use it to buy votes in the next election. Now your polly crooks are all into trusts cos they know the ins and outs of avoiding the tax traps. Only mug peasants get done to a turn when they cark it. Guess who made the rules? T

This study shows that life expectancy is affected by retirement age, the earlier you retire the longer you are likely to live but the longer you work the earlier you will die, So if you want to live over 80 you need to retire in your 50's (if you can afford it) so bb's forced to work longer could reduce their life spans. I also read somewhere that the majority of retirees who want to work longer don't get to do so because of bad health.

Roger Thompson Says: September 20th,

Roger Thompson Says:
September 20th, 2009 at 2:00 pm

Isn't that the point of reverse mortgages , so that you can access its value , to use in your retirement . Ergo , you can " eat your house " .

To a point, but the amounts you can borrow are very small, compared to the house value. Also notice how a few years ago, these reverse mortgage comapies used to advertise everywhere. However today, there is little, if hardly any advertising. I wonder what the reason for that is, although I have my own ideas.

@ Rob - your last

@ Rob - your last paragraph echoes my own sentiments. Reverse Mortgages were quite popular a few years back (when house values were skyrocketing) but they seem to be diminishing in popularity lately (in line with house values perhaps!). I'm not suggesting there is no place for them, but I think it's definitely a case of Buyer Beware, read the fine print and don't assume the value of the house will increase exponentially indefinitely.

Kieran touches on an important

Kieran touches on an important point. As much as people may wish (or may have to )to work into their late 60s, many can't due to health reasons. Also I am not sure if I agree with Neville's argument that we will be healthier for longer in the future, and live longer lives. He tends to assume that we live healthier lives now - yes, in some ways we do, but in some ways we don't (the prevalence of takeaway and junk food culture, the growth of the obesity problem, more stressful lives in general)
Also, I am not being ageist, just honest, many peopoe I work with who are in their early 60s really do seem to lose their sharpness and reliability around then, and the results are often not pretty, nor are the consequences only trivial. A workforce increasingly characterised by over 60 year olds could have some nasty productivity consequences

You don't have to be

You don't have to be old to have nasty consequences.
The people that got us in to the lastest problems were sharp, young, bankers!

The UK has just done

The UK has just done a significant reversal on assisted suicide for the seriously disabled and terminally ill, in that it has decriminalised those that A) assist, as opposed to those that B) encourage suicide for the purposes of financial gain. They are adopting the Swiss model and I assume it will not be long before the NHS sets up its own version of the Swiss Dignitas Clinics. While on the one hand I welcome this, I also fear it is inevitable that there will be future government sponsored campaigns encouraging us to make living decisions on these issues while we are deemed mentally sound and prior to suffering from the afflictions of the very elderly/sick. A 'your country needs you (to die early)' campaign, similar to the wars of the first part of the 20th century. This throws up many ethical dilemmas as naturally the State will also be immune from accusations of B (even though this is an extremely cost effective policy). Not much dignity in being elderly, infirm and defiant is there? Seems my decision has been made for me.

Sharon: I'm all for the

Sharon: I'm all for the Dignitas Clinic approach. An ability to make your own choice on whether to continue living, under proper controls and processes, is a no-brainer.

I'm not particularly interested in the "thin-end-of-the-wedge" paranoias that surface.

From my observation, most anti-euthanasia campaigners are deeply religious. Yeah well ok, they (& you, who I imagine are religious) are perfectly welcome to sign a legal document saying you wish never to have your life terminated, even under your own future wishes. & that should then have the sanction of law. Good luck to them.

But I don't see why their religious qualms should stop me (a non-religious person in a supposedly secular society) making my own choice on the matter. & the law should allow that, under proper licensed conditions.


Kieran.. I would strongly dispute

Kieran.. I would strongly dispute those claims...
Just look around at those you know...those who 'retire' fix the house, run out of stuff to do, slow down and die....Those who 'retire' keep working and do what they now want to, live long and healthy.....we have a good friend, at over 80 is still running his now 1 man plumbing business.
Then there is the perception by younger generations that older people are slow...
1/ like a computer they have so much more info to sort thru, and then come up with far better solutions...X and Y like with a blind person think they are retarded.
2/ Why for 1000s of yrs the elderly where often considered wise and respected, now they are considered stupid?

If the x and y whizz kids sh... and bust took a bit of time and thought thinks thru, had more respect, listen more, we would not have so many of the financial and social issues that plague us today.

And old saying " there are a lot of good deals missed by taking ones time, but there are far more bads one missed"
For civilisation to exist it requires a stable. 'wise' judicial system, is this not the basis of stable sysyems for centuries , and even today?

Philly - just goes to

Philly - just goes to prove assumptions are the mother of all .... up's. I also totally agree that the Dignitas Clinics are a very humane concept. Re-read my post. Neither am I religious. I suppose my problem is if anything philosophical. I am happy to choose my own ending however I object strongly to the State manufacturing my consent for that end. There is a difference and this is the fine line that ethics has to mark out.

one thing that occurs to

one thing that occurs to me is that aging isn't just about money;it is about winding down and accepting death and so it is a time for reflection and a time when environment and community are important.
In Chch a 90+year old complained about a neighbours wall which blocked her view of the Port Hills. The neighbours reply was that (what he was doing) would add to the value of her property.

Sharon: Ok, fair enuf, that

Sharon: Ok, fair enuf, that was the calculated stab about your religion, didn't work out that time!

Taking the points about state "death panels" etc further. I think there is going to be all sorts of s#!t going on in the future. Not just aging populations but a move in economic power, peak oil, resource wars, mass starvation. My mantra is "the future isn't going to be like the past". So whatever we decide on euthanasia etc, I think a lot of serious meltdowns are going to happen anyway.

We were in the Black Forest last year, & went thru some old pre-industrial farmhouses. The whole family lived there with animals, hay, cottage industry, you name it - all squashed in. There was also a store-house next door with no amenities, pretty draughty & horrible. Apparently that was also where they put the older generation when they could no longer contribute.

Something like that could well be our future.

A sub-head for the article

A sub-head for the article could perhaps be: Your Mileage May Vary.

And, of course, not a few boomers saw the peak of the bubble (roughly, timing is always tricky), sold off the mansion to a greater fool, and downsized. I won't say that there will not be a rush for the exits as the great mass of 'retirements' occurs. But anything (policy, individual action) which stretches out the peak, will aid in getting through this situation. It's not going to be a sharp, normal-looking distribution. Fat tails will rule, IMHO.

And really, folks, there are a lot of ways to get help with a too-large house and its heating bills. Boarders and extended families, for one...

Those with a lean towards the dramatic, as Philly seems to be, have a ready prophet in Jim Kunstler (Long Emergency). But one does weary of the constant siren call of 'we're all Doooooooomed'. Especially as we are clever people, with a wealth of wisdom in these old brains (somewhere...), living in a country blessed with lots of food, minerals, and fuels. The is more than a grain of truth in Kunstler's rather bleak vision, as it applies to the States (settlement patterns having co-evolved with the car), and in a different sense for Britain and Europe (where demographics and will are both negative).

But that doesn't apply here: all geopolitical circumstances are local.

So perhaps a grain of salt, to go with the doomster prognostications? Oops, salt can cause high blood presuure...Well, you gotta die of something.

Philly,"There`s going to be all

Philly,"There`s going to be all sorts of sh... going down in the future".
It will be the same sought of faeces that mankind has always made.Same car,different century model.Humankind will always react the same.Fourty somethings throughout time have always "known" they know it all,I certainly did.Go outside all of you and smell the flowers,fresh air,love your fourty year old kids,and enjoy whatever length of life you will have.

yep - the future is

yep - the future is not going to look like the past that is for sure and its difficult to be positive. This change is closer than most in the west are prepared to acknowledge. We have been too comfortable in our liberal democratic ideas and they are about to strangle us. I guess where there is a will there is a way and assisted endings have always been around pleasant or otherwise. As for the store house idea - I guess if it was winter hypothermia would set in quite quickly and you would just go to sleep. Keeping the animals in a wintering barn under the house is still common practice in parts of Germany. As well as looking after the animals it helps keep the upper floors warm.

Jeez Alex, I new pretty

Jeez Alex, I new pretty much everything at twenty, never mind forty!

On a more serious note Neville, you are rather assuming a continuation of the benign trends we have been experiencing. What happened in Russia in the 1990s? I hear the elite basically took ownership of the productive assets and inflated the currency to destroy the purchasing power of the savings of the elderly. The elderly were then largely left to die.

Perhaps an article on what actually happened and just what can go wrong would be instructive. It has not been reported on at all in NZ as far as I am aware.

Some wise and respected old

Some wise and respected old people told be that history does repeat itself, and yet I am now hearing that it isn't/won't?

We have not had a mass mortality event in sometime. History has shown us time and time again that they happen, yet there is no discussions that we may go through another one at somestage in the near [50 year] future. We seem to be hell bent on trying to stop the next one, which like the financial situation, will only mean that the one in the future will be worse.

Wipe out a significant proportion of the population and all the rules get renegoiated. We all may have to keep working till we die etc.

It is about survival of the fitess, not necessarily the wealthiest. We have just been told and brought up to believe that the wealthier we are the more chance at "surviving" we have. Who is to say that the rules have really changed?

I am loving the debate/discussion over this topic.

Steps there are other studies

Steps there are other studies which show the same conclusions: Retiring early is good for your long term health but working longer leads to a shorter life. Work is stressfull and hard on your body and stress is a major cause of heart disease and other ailments. This is one of main reasons why females live longer because they retire earlier and their working life is shorter (this is changing though) its a myth to think that working longer is good for you, scientific evidence proves the opposite.

I wonder if the stats

I wonder if the stats also include the type of diet one eats at work, on the run..the coffee that causes stress...crap food and coffee is more a male thing too.
No that just could not have any influence over a life time...
Retire sit back relax..brain goes soft, muscles seize up get fat...
Scientific evidence often doesnt prove anything if the basis on which it is done is flawed, and a hell of a lot of it is...including this...ask any GP.

Back in my financial planning

Back in my financial planning days many of my clients sold their family homes on reaching retirement to move to smaller, easy-care modern flats.... ie, the homes of choice for retirees. In no case that I was aware of did they get as much for their family homes as they paid for their flats. As more baby boomers retire, the laws of supply and demand will mean more supply of family homes and more demand for retiree flats meaning it will become impossible to get any extra cash out of your family home.... the exact opposite of what most people have been led to expect.

Hey Charles : Good to

Hey Charles : Good to see you adding to our wealth of knowledge . My elderly Mum is in that conunderum , of wanting a smaller place , but finding them only marginally cheaper than the old 3 b.r.m. family home . Now she's taken to jazzing up the large garden , and is getting more exercise . And invigorated from landscape planning . So I guess its up to the individual to react to these situations , to find a positive solution . And I've still got a bolt-hole to hide out in , when my missus chucks me out ( a monthly occurrence , strangely enough )