How long will you live?

Good article as usual Graham. You may recall the article I wrote and you published here called "The Financial Life Cycle Paradox" on 27 June 2013. This article is just as relevant today as it was 11 years ago.

Michael, I’ll take another look. That’s a lot of years gone by.

Charles, your comment "Surely the surviving partner in a two member SMSF can retain the super if the trustee is a company?" is only correct in certain circumstances and to a limited extent. It's too involved to explain here.

The following comment from Cam was a very helpful explanation of the most critical points when one partner passes away leaving their super to the spouse. “ Super can go to the spouse and remain within the super system. The restriction is the survivor can only have up to their Transfer Balance Cap as superannuation pensions. If the surviving spouse is to receive more than their TBC then the rest has to be paid out of super.”

(Note to John De Ravin. Thanks for this elaboration, I have removed my short comment on this point as it is not the purpose of the article. Explaining the treatment fully would bring a new subject into the article. Graham Hand). 

Yes, point taken Graham, thank you. I acknowledge for example that a death benefit can’t be retained in an accumulation account, and also that a BDBN from the deceased spouse may have an impact on what can or can’t be done with the proceeds. So it’s not a completely simple issue.

A superannuation fund is a particular kind of trust. The trustee of a trust has a responsibility to mange the fund on behalf of the beneficiaries of trust but does not own the assets. This is true if the trustee is one or more individuals, or a company. The treatment of a super death benefit is determined by the super (and tax) regulations, not the type of trustee managing the fund.
Because a super fund is not structured as a company, the members of an industry super fund are not shareholders and have no say over the actions of the trustee. In an SMSF, however, all members must be trustees, and all trustees must be members. This ensures the interests of members are in alignment with that of trustees.

There was a very interesting documentary a number of years ago that showed one of the key factors in people who lived to be old (>100) was that they had no kids! Men & women, so not a biological side-effect of giving birth. I can't remember the numbers but something like 5% of the population who had kids lived to 100, but closer to 15% of those with no kids made it! Statistically very significant, and thought provoking! Methinks stress might be involved somewhere.....

Who cares, I'm just happy to wake up every morning and enjoy the day. As long as you have a roof over your head, comfortable bed and food to eat, life is good. Worrying about how long you are going to live is not going to extend your life. Be happy!

In the 1980"s women got the pension at age 60 and men at age 65. I always thought that as unfair as life expectancy for men at 65 back then was only 5 years . The life expectancy for women at age 60 was 15 years, so 3 times the years possibly getting the pension. Fortunately Vets qualified at age 60 also. At age 75 a new Kawasaki motorbike and new Subaru Outback.

Great work Graham. You are an inspiration. Thanks for the acknowledgment. Raising longevity awareness is a much stronger imperative than financial literacy in order to make the best of our longevity - the rest of our life. By undertaking simple longevity planning, we better understand our own future including why it may be so and the stages. We can make informed decisions about our potential longevity. This frames our future (and that of our partner) so that health, financial and estate planning are all working from the same basis. As things change, we are then able to adapt our existing longevity plans and re-frame our other decisions. Financial advisers and super funds in particular can now adopt this online, compliance-free process to benefit their clients and members and get to know them much better.

Sounds like DIY super is worth keeping so funds can be maintained in the event of one partners death?

Hi Margaret, DIY funds will be help. In the event of a partner's death, their super need to return to non-super. Super is to fund retirement so once a partner is dead, super must be returned.

Correct. As an accountant I've helped a number of people through this process over the years. It may not all be able to be kept in super. Also, it may be better to remove from super, noting that after the 2nd spouse dies there can be tax before independent adult children receive the benefit.

Surely the surviving partner in a two member SMSF can retain the super if the trustee is a company?

I agree with the good Dr,
Now 77, I'm anticipating falling off my perch at somewhere around 86 - the mid-point of my parents' demise.
The gene pool is pretty good - all hale and hearty, my siblings are 82 (M) 74(F) and 68(F).
When I hit 70, my elder brother welcomed me to the "80 +/- 10" Club.
Forewarned is forearmed I guess, and only time will tell.
Oh, and I've swapped my MG for an MX5.

Evidence shows that a persons expectation of their death age is heavily influenced by the death age of their parents, despite the fact that their parents life expectancy was considerably shorter due to being born in a different era of health outcomes. My father died at 93 and my mother at 70, I guess that means I should die at 82

Ian
Can you please provide a reference to this evidence you quote.
Thanks

Hi Ian,
I agree that mortality is influenced by parental age at death. In response to Peter Vann’s question, a recent article in the Journal of the American College of Cardiology, Longer-Lived Parents and Cardiovascular Outcomes: 8-Year Follow-Up In 186,000 U.K. Biobank Participants, supports your assertion about the relationship between our mortality and our parents’ age at death.
Having said that, though I don’t think you can simply average your parents’ ages at death (especially if one has died a bit young). One reason for that is that you also right when you say that mortality has been steadily improving for a very long time; the improvement has been about one year of life expectancy for every five calendar years that go by, and that alone is a reason why people often underestimate their life expectancy if they focus too much on their parents.
Finally, I have seen it suggested that our mortality, particularly at younger ages, is related more to our own lifestyle than our genetics (I’ve seen “70% lifestyle, 30% genetics”) but that genetics become increasingly important as we get to very advanced ages (say in our 90s).

Ian & John de Ravin, thanks for info. I too think of mortality re prior generations as predominantly female 3 gens & find interesting. 1st gen not all info re siblings but 2 female in both 1851 and 1911 census so getting up re age for times. 2nd gen born 1871 on in time low expectancy-- 5 female to 90 - 99yrs, 1 male 86, I knew them. All females worked, unusual, professionals to farmers, youngest kept house for others until unmarried & oldest sibling died & lived to 99. Maybe hard work /independence counts. 3rd Gen born 1906 on, 2 of 3 female lived to 90 ( Mum), all professionals/family business and children, unusual. Hard work again. 1 male died 29 (ill). 4th gen 2 females, 1 male died 25 (ill) as prior gen, no progeny from male of 2 generations. Females still cracking on. With the female dominacy often wonder about this subject so perhaps your last sentence John is relevant re genetics though female friend to 85, brother 75 and their mother to 106 with full eysight & hearing in tact to death and own housework and cooking to death. Extraordinary lady, hard work again, schoolteacher & somehow got around not resigning on marriage.

My old man died at 93, despite drinking heavily after spending most of WWII in a bomb disposal unit, where life expectancy was not great. Vets got the aged pension at 60, because WWII service was deemed to take 5 years off one's life. This suggests I might make 100, at least. That's gonna hurt - a lot.

Graham, Thanks for the very interesting article.
Please could you clarify your statement : "many surviving superannuants think money goes to the spouse on death. In fact, superannuation cannot be held by a surviving spouse and must be cashed in or invested within 6 to 12 months of the death."
From the ATO website :
When a person dies, in most cases their super fund pays their remaining super to their nominated beneficiary.
Super paid after a person's death is called a 'super death benefit'.
If a death benefit is paid to a dependant of the deceased, it can be paid as either a lump sum or income stream.

Super can go to the spouse and remain within the super system. The restriction is the survivor can only have up to their Transfer Balance Cap as superannuation pensions. If the surviving spouse is to receive more than their TBC then the rest has to be paid out of super. I expect SMSF members have accountants who can give facts. Otherwise it could be worth getting advice.

Cam, and very much so if Non-Lapsing binding death nomination for deceased's super to be paid as pension to surviving partner, people need know it stays in super whether SMSF or Retail & talk/understand together as get older plus advice as you say, instead of shock of no control of destination nor other use of capital if a N-L BDN. Though per Graham's reply above not point of article, but apropos article title and penultimate paragraph, super situation at death raised comments by its nature.

Well done DougC on highlighting a sentence with significant potential to mislead. It’s only when the surviving spouse has Transfer Balance Cap issues that the death benefit can’t be retained within the superannuation system.

Graham
Thanks for pointing out that you are linked to the year you were born not to the current year - I have given up correcting people who fail to see that if you are now (say) 70 then you have 70 years of wear and tear, past habits now known to be problems (too late brother) and only accessing the new preventative tests now and not back when these diseases could have commenced. What matters most is the family genes (and the breeding choices made for better or worse perhaps 100 years back that you are stuck with), so at 73 I have just traded my Mustang on a Benz AMG, the numbers of deaths from high speed tree collisions seem low so I take that as an indicator.

Life expectancy by State & Territory, gender and age:
Columns titled 'ex';
https://www.abs.gov.au/statistics/people/population/life-expectancy/latest-release#data-downloads

Column lx, median (50%) age of survivors: male age 84-85, female 88-89.

Great that you're writing again, Graham. I wonder how many might conclude that the elevated death rates post COVID supports the vaccine injury argument?
Looking forward to your article on how to live longer and how to ensure a retiree does not run out of money!

Nina I believe the virus is active in the community now we're vaccinated, and as a result its killing a lot of older people. The idea is we all got vaccinated which is still saving lives, but a lot of old people with poor health are succumbing to it.

There is evidence that the vaccines caused ill effects or even caused deaths in some people, but they saved many lives. As for the vaccines being the cause of increase in deaths after the pandemic? "A" happening before "B" doesn't mean "A" is the cause of "B". You may as well blame the opening of overseas travel, return to working in the office, the change of government or other events. One sad thing that is more probable is that during Covid, many people skipped going to the doctor or treatment in hospitals due to the fear of Covid and that may have resulted in more deaths later.

Carpe Diem!

Interesting stuff Graham ... reminds me of the old joke: "I'm really enjoying sex at 75. Well, I only live at 71 so it's not far to walk". I'd certainly pick up on your Super fund comment that "they certainly don’t know the needs of their partners and families, and the problem becomes more acute the older the member". Spot on, but how on earth can the funds know what their countless members want when, to quote the Pythons, we're all individuals ? It's almost impossible. My personal thinking here is funds should act as a well protected / invested 'bucket of money' for members in accumulation phase, and then develop advice / info on a series of 'likely scenarios' when pension / access phase nears or happens (e.g. what happens if you get serious or life threatening illness or injury, what are the implications if your spouse if much younger or older than you, what are the tax implications of your BDBN regarding who you choose to your pot to on passing, what can you do if you have a large amount of funds in Super / pension but your spouse has little, etc etc). I'm sure this info exists within the funds today, but certainly no one from my fund has made me actively aware of it (I'm mid 60s). Surely funds should be pushing this content (or at least the existence of it) to members ? I don't personally feel it's the remit of funds to offer personalised financial advice per member or family, but surely basic 'what happens in this scenario ?' playbooks and comment that is actively made aware to their members would be a good thing ....

All excellent comments and a very good article. But just commenting (Mart) on Super being left to pass to a beneficiary via a BDBN (Binding Death Benefit Nomination) --- please be careful that you do actually have "Non Lapsing" BDBN's in place -- otherwise your BDBN only lasts three years and then, guess what, lapses, unless you renew it. It's amazing often how this small point is overlooked and things fall through the cracks. I am only commenting on our personal circumstances of course here.