Client: Why do you ask me to consider planning for income until age 100 when on average, I’m looking at about age 80?
Me: Because when it comes to retirement, you will not have any problems if you don’t live long.
Client: What do you mean by that?
Me: Suppose you retire at age 60 and dies at age 65, it doesn’t matter how much savings you have. It doesn’t matter what is the rate of inflation. It doesn’t matter what type of return you will get from investing your money. All of these will not matter because you will not run out of money.
Client: Ok, that makes sense. But I don’t think I will live beyond 80.
Me: What if you accidentally live too long?
Client: Can I really live that long? Your accident is not so easy to happen. I thought the number is about 80?
Me: Yes, the average Singaporean lives to be about 80. Do you know what “average” means?
Client: Erm…it means average?
Me: It means that if you take 100 people, 50 will die before age 80 and 50 will die after age 80. The “accident” have a 50% chance of happening.
Client: Opps…let’s plan for a bit longer then.