Many retirement planning tools not accurate in life expectancy

Optimum Pensions has called on retirement professionals to check their life expectancy calculation methods are fit for purpose.

It said many retirement planning tools might not always reflect best practice when it came to determining and allowing for life expectancy.

“If the lens we view retirement through is inaccurate then incorrect conclusions will be drawn about retirement strategies and decisions. Retirees should not be paying the price,” it said.

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Optimum Pensions noted many tools reflected outdated and inappropriate life expectancy statistics.

The firm said it had launched its new Lifespan Calculator which was based on the latest Australian Life Tables but also incorporated health data from a large reinsurer of longevity risk.

The tool did not show averages but results could be personalised by considering health and lifestyle factors. It also included both spouses in a couple and let each user focus on how confident they wished to be that their retirement planning timeframe could cover both their potential lifespans.

Optimum Pensions head of innovation, Jim Hennington, said: “This can add 10 years to the results that a less-accurate life expectancy calculator provides”.

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Good point. But a little irrelevant. Baby boomers spending habits and the requirements to take increased pension payments from super as you get older mean most people spend all their money well before they will die. ( Unless you are employed by the government!)

Ask the client how long their parents lived or how old they are and add 10 years. It's a pretty good rule of thumb. Not rocket science.

First, define retirement.
Second, stop using photos of elderly couples relaxing.

Change the conversation around retirement to more purposeful & meaningful life rather than Golf with the same 5 mates 5 days per week

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