What living longer means for your money

In 1990 there were a mere 95,000 centenarians in the world (that we knew of). Now there are more than 500,000. That’s partly a function of a fast-growing population, of course – there were more births in 1925 than in 1890. But it is also one of rapidly rising lifespans. Over the last 100 years, life expectancy has gone up by a couple of years every decade. 

The Office for National Statistics’ life-expectancy calculator (well worth a visit if you need a boost) will tell you that a 60-year-old man today is most likely to live to be 85, and has a 3.5% chance of hitting 100. For a 60-year-old woman, the respective figures are 87 and 6.2%. 

So that’s nice. But it does come with a problem. We are not just extending the healthy parts of our lives, but the unhealthy parts, too, when what we really want is to be a bit more Dorian Gray about longevity (albeit possibly without most of the debauchery), says Professor Andrew Scott, author of The Longevity Imperative. We want to live as if we were young and then die, without the miserable, hanging about being infirm years towards the end. 

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

How do we do that? The first way is the obvious one, and something we can improve on at any age: diet, exercise, stress reduction, sleep, and strong social networks. Think prevention. The next is all about drugs. There are new vaccines against everything you can think of (from nasty new viruses to cancers) on the way, and much work is being done with gene discovery and big data. 

The future will be partly about telling us where our risks are and how we can live to reduce those risks. Then there are the latest wonder drugs, the GLP-1s (a category containing the weight-loss drugs Ozempic and Wegovy). Obesity, as Scott points out, is a biomarker for all other sorts of nasties such as cancer, heart disease and diabetes. Use one of these drugs to get rid of that problem and you cut the risk of the rest.

How to invest in living longer

There is also evidence that regardless of weight loss, the drugs help with heart health and addiction. Those taking it report less interest in everything from alcohol (goodbye alcoholic liver disease) and drugs (which seems a good thing) to sex (sometimes good, sometimes bad, I suppose). In cutting the risk of diabetes they also cut the risk of dementia. 

There’s a view from the moral high ground that these drugs should not be prescribed: we should all eat less and exercise more and everything will be fine. The problem with this is that diets don’t work. If they did, only one diet book would be required. That there are hundreds of thousands of them, and many times that number of people buying them over and over again, tells you that is not the case. The next leap in longevity will not be driven by willpower. It will be driven by drugs. 

Either way, it looks as if you can expect to live well into your eighties and possibly into your nineties (MoneyWeek readers tend to be well-off and the well-off tend to live longer). What does that mean? For the state, it’s complicated. Being over 80 used to be a minority experience. It is now a majority experience. That means fiddling with pension provision: more contributions, perhaps, and a change in the way the state pension is managed. 

It means encouraging lifelong learning and career changes as people age. And it means doing something (pretty much anything at this point) to try to turn the NHS into more of a health-promotion service than a misery-management service. 

For the individual, it’s just as complicated. Every book on longevity tells you that you must invest in your human capital and be prepared to have a flexible career. The longer you can work and the more you can spread your working life across your lifespan, the less you have to save and, possibly, the happier you will be given the research into how a sense of purpose feeds into longevity. 

But you must also save, invest (with an eye to the possibility that the state pension will eventually be means-tested), and attempt to manage your spending such that you don’t run out of money too soon. 

Many of us think we would like to manage things so well that we die broke. But we don’t want to die because we are broke. In the past, this risk was often mitigated with tontines – a system whereby everyone put some money in a “trust” and the last man standing got the lot. Good insurance against living longer than everyone else, but sadly now illegal – there can be unfortunate side effects to allowing people effectively to bet on other people dying before them.

Annuities: the key to living longer

With that in mind, it’s time to look again at the other options open to us: annuities, and in particular, deferred annuities. These are bought to pay out at a later date – so a 65-year-old sorting out their pension arrangements and concerned about living longer than expected might buy an annuity designed to start paying out at 85, or even 90. 

That leaves you with the ability to use your pension freedoms as you like and spend in the knowledge that at whatever age you have chosen, a regular income will kick in. You can’t know how long you will live, but you can choose an annuity age. 

Think of it as a rare example of two things: financial certainty and insuring against something desirable. Annuities are rarely cheap, but have become much better value over the past few years. There is also the chance that if you buy now you will find that providers have not yet factored the long lives of a new, slim, heart-healthy population into their models. Win win.