Despite all good intentions to plan for your retirement, you run the risk of outliving your retirement pot. This is particularly important since life expectancy is increasing due to advances in medical care.
Longevity risk is the risk that increased life expectancy results in higher pay-outs than expected for your pension fund.
However, the life insurance industry has not been able to design a robust longevity risk mechanism that can effectively transfer and assume this risk. As a result, you are implicitly holding this risk.
To handle this risk, we recommend these two approaches.
One of the biggest unknowns in retirement planning is that the shortfall is hard to project. This risk can be exacerbated by low interest rates and low asset returns. With such uncertainty, there is no buyer for this type of risk.
Therefore, by combining legacy planning with retirement planning, we increase the likelihood that you will be able to maintain a reasonable quality of retirement life, should you exceed the average life expectancy, by lowering the legacy amount. So, transfer the risk to the next generation.
Higher life expectancy is driven mainly by better care and medical breakthrough. We curate this into an investable theme so that whilst you reap the rewards of above-average earnings growth of these companies, you indirectly hedge for the risk by growing your retirement pot faster.
Crea8 allows you to buy direct stakes in pharmaceutical and biotech firms worldwide or via Exchange Traded Funds. You get a more direct concentrated effect in the former way whereas the latter spread your investment across a wider range of stocks. Both ways will allow you to benefit directly and hedge out the risk.
The risk of outliving your retirement pot is a known risk that we can plan for. As such don’t die a pauper. Join Crea8, make your retirement and legacy yours!
