Don’t let low-quality longevity overshadow your retirement.
It’s not about how long you live, but about the quality of your life.
Retirement investors should shift their focus from trying to create the perfect portfolio and spending rates to something called health-adjusted life expectancy.
The simple explanation for this term is how long you will live in good health. The gap between living and living well is wider than you think.
While life expectancy is rising, healthy life expectancy is lagging,
According to The Retirement Manifesto:
That gap, the years we live in poor health, has widened to an average of 10–12 years in most developed nations.
- In the US, it’s 12.4 years.
- Australia: 12.2 years.
- New Zealand: 11.8 years.
- UK: 11.3 years.
That’s more than a decade of life spent managing chronic illness, pain, or disability, often fuelled by diseases of affluence rather than poverty.
While many have more money than they ever dreamed, the wealth effect disappears due to a sedentary lifestyle, poor diet, loneliness, substance abuse, and chronic stress. The result is people living with one or more chronic diseases.
According to Public Health England, over 40% of adults live with at least one long-term health condition. The NHS reports that nearly two-thirds of over-65s take five or more prescription medications daily.
Americans find themselves in a similiar boat. Healthspan isn’t keeping pace with lifespan.
The idea of a long, happy retirement isn’t realistic for most people.
The First Decade Retirement Plan makes a ton of sense.
The majority of Americans want to have an active retirement filled with travel, outdoor activities, playing with grandchildren, and staying physically active in an unrestricted manner.
If we use the 12.4 years of healthy life expectancy (The time living in poor health), retiring at age 65, and dying at 87, we can extrapolate a plan to maximize post-work enjoyment.
The years between 65 and 75 are the prime target for deploying more resources. By the time 75 arrives, many people will notice a decline in their quality of life, accompanied by the inability to check off items on their bucket list.
When I construct financial plans for clients, I prioritize setting a first-decade spending goal.
Most people will run out of health before they run out of money. The First Decade plan provides insurance that they spend their money and fulfill their dreams before it’s too late.
Nothing is guaranteed. Some people will live longer, while others will die prematurely; however, using this data provides a high probability that focusing on retirement priorities will be at the top of the agenda.
You’re missing the point if your focus is on life’s length rather than its quality. Understanding that you may only have a 10-15 retirement year window for optimizing your plan adds urgency to your plans and prevents you from becoming the wealthiest person in the graveyard.
Suppose you dedicate the majority of your wealth toward funding the final couple of years of your existence, living the lowest quality of life possible, and being kept alive but not living with massive amounts of medical intervention. Is this really what you worked your whole life for?
Planning for healthspan isn’t a painless decision. I struggle with this concept daily.
Ultimately, it’s best to choose reality over dreams when it comes to retirement.
Living your life while you’re still able should take precedence over all your other goals.
