Wealth and health go hand in hand and most of us are thankfully living longer, healthier lives as we grow richer. But what if we outlive our savings? How can we plan for the future by making realistic assumptions about what we might need in later life and what it might cost?
These concerns aren’t new. Some academics think that 100 years ago, as many as half of Americans saved for retirement using a tontine. This financial instrument was effectively a death syndicate in which members saw their dividends, at pre-agreed ages, increase as others in the pool died – the last to die got the most. And tontines may yet be revived as a form of life assurance.
At Close Brothers Asset Management, we specialise in planning for our clients’ futures – holistic financial planning and investments. That’s why we designed Intelligent Retirement® – an interactive tool which doesn’t just plan for your retirement, but guides you through it for decades. Our Glide Paths are designed to actively manage your assets as you age and your life changes, combining institutional data on what the future might hold with who you are and how you want to live. Remember, the value of investments can fall as well as rise and you may get back less than you invested.
You could wait for a tontine. You perhaps should consider life assurance and other cover. But you should definitely plan now for an intelligent retirement.
Despite their troubled past and negative portrayal in popular fiction, tontines—or a modern variant—may just make a comeback. A small but increasingly voluble group of academics, as well as some asset managers and actuaries, think that an adapted form of tontine might be just the product to provide insurance against the risk of outliving one’s savings, an issue with which retirement planners, corporations and governments around the world are struggling to cope.