What is longevity risk and how to overcome it
According to World Health Organization (WHO), worldwide, the number of additional people expected to be enjoying better health and wellbeing is projected to be 1.5 bn by 2025 compared to 2018.
May 2025
3 mins read
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Born in 1800s, Aqel Nazir, living in the eastern Khost province of Afghanistan has claimed to be 140 years old. Deolira Gliceria Pedro da Silva from Brazil claims she has turned 120 years old. The dream of reversing aging has captivated humans for centuries. With the advancement in awareness and healthcare technology, we may be closer to that dream. American tech millionaire Bryan Johnson reportedly spends $2 million per year to reverse his aging. While this may sound far- fetched for most of us, people are taking tiny steps towards a better health or at least 10,000 steps a day.
According to World Health Organization (WHO), worldwide, the number of additional people expected to be enjoying better health and wellbeing is projected to be 1.5 bn by 2025 compared to 2018. People worldwide are living longer than ever and India is no exception. In India, the population aged 60 and above is expected to more than double to 34.6 crore by 2050, from 15.1 crore in 2023. (Source: WHO)
How to prepare for longevity risk
The International Monetary Fund (IMF) estimates that if everyone lives three years longer than expected, the present value of additional retirement expenses during these additional years of life could amount to 25-50% of global GDP.
Thus, the definition of retirement age is transcending worldwide as people are living longer. Living longer is boon as well as a bane. While you get to enjoy more time with your loved ones, the risk is of outliving your corpus - ‘longevity risk’. To enjoy the additional years, you may have to keep working well past your traditional retirement age or start saving more.
You can adopt some of these strategies to better prepare for your bonus years:
• Estimate your lifespan and retirement income needs by factoring in inflation by taking a holistic view of your finances and dependents.
• Consider adding more growth assets like equities to your portfolio to outpace inflation and create a corpus that can last longer.
• Healthcare expenses tend to shoot up post age 65, so reassess your medical insurance so that such expenses don’t impact your savings.
• Consider de-risking your portfolio by splitting your corpus into three different buckets (1: Low Risk, 2: Hybrid, 3: Equities) to ensure you don’t dip into your equity bucket when markets are down. This gives some extra years for your equity portfolio to grow so that the corpus lasts longer.
• Look at ways to monetize your skills/hobbies so that you don’t have to rely on a single source of income. This can be of great help to fall back on when you retire from your formal employment. Being occupied either in hobbies or through part-time assignments can have a positive effect on health as well as wealth.
To sum up, you can overcome longevity risk by cutting down your discretionary expenses and adopting some of the above discussed ways to ensure you have a purposeful and worry-free retirement. Working with a trusted advisor can help you plan for your golden years better.
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All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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