Implications of narrowing mortality gap between men and women
The latest Australian mortality rates have shown that the gap between male and female life expectancies is less than five years, which could have significant implications on retirement planning.
Australian Life Tables 2005-07 have shown that the gap is at its narrowest since the 1940s. Males born today have an average life expectancy of 79 years, which does not take into account improvements in mortality rates. Female life expectancy at birth is 83.7 years.
One of the implications of this is that the pool of retirement savings within a relationship will be significantly impacted, said Michael Perkins of Diamond Conway Solicitors.
“Where the parties are living for longer, the capital needed in retirement is going to be greater,” he said. “Before we had the prospect of husbands dying first, so that joint pool of money often only had to support a wife for maybe 10, 15 or 20 years. Now the husband living longer means the capital adequacy of the retirement pool is going to come under pressure.”
He said another issue to consider is health care costs, which also have a significant impact on retirement savings.
“Along with longevity come chronic health care problems,” Perkins said. “The real trap in all of this is that disability does not necessarily shorten your life, but it can dramatically raise the intensity of health care costs.”
Perkins said one of his former clients was the longest suffering Alzheimer’s patient in New South Wales, who lived for a further 27 years from prognosis.
“A lot of retirement planning is predicated on continued good health, but the health care stats and the spend of the national budget suggest that maybe there’s only a two in three chance of that occurring. Along with retirement planning, financial advisers need to be thinking more about care cost planning later in life.”
Estplan’s Guy Thorneycroft said good financial advisers who specialise in retirement and estate planning would take longevity into account as one of a myriad of possibilities, so these changes in life expectancy should not have a significant impact.
“While I can see it having implications long term, and generally there should be a trend between that narrowing gap and less provision being made for the surviving partner, in real terms those who do a proper job will cover that as a possibility anyway,” Thorneycroft said.
He admitted that it is often the case that planners would assume the woman in a relationship would live longer and a lot of case studies have been based on that assumption.
“There may be less emphasis on that going down the line, but I think it’s a small component in a bigger picture that is now being looked at it.”
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