Retirement planning: Why your healthspan matters as much as your lifespan

Most people assume that if you retire at 60 or 65, your investments will need to last for 25, 30 or even 35 years

That may be technically correct, but the more important question is: how do you want to use your wealth while you are still healthy, active and mobile?

Living longer does not necessarily mean being able to enjoy the same experiences throughout retirement. This is where healthspan matters as much as lifespan

Lifespan and healthspan are not the same

Lifespan is how long you live. Healthspan is the period during which you remain healthy, active and able to live independently.

The two do not necessarily run in parallel.

You may have enough wealth to fund decades of retirement, but your ability to travel, pursue hobbies, spend time with family or live between countries may be greatest during your first 10 to 15 years.

This creates a retirement window: a period when you have both the financial resources and the health to make the most of them.

Traditional retirement plans can miss this because they often assume your spending will follow a fairly predictable pattern, rising with inflation each year. But life does not always work like that. Your spending and priorities can change significantly throughout retirement.

Why the timing of retirement spending matters

For many people, spending is higher during the early years of retirement. This may be when you travel more, renovate your home, visit family overseas, take up new hobbies or pursue goals postponed during your working life.

Later, priorities may change. Travel may become less appealing, physical activity may become more difficult, and healthcare or long-term care costs may become more significant.

A long-haul trip at 66 is not necessarily the same proposition as one at 84.

This does not mean you should spend recklessly in early retirement. It means your financial plan should recognise that the value of money is partly linked to when you use it

The risk of being too conservative in retirement

After decades of saving, investing and building up your pensions, it can be surprisingly difficult to start spending the money you have worked so hard to accumulate.

You may worry about living longer than expected, market falls, inflation, future care costs or how much you want to leave to your children or other beneficiaries.

These are all valid concerns. But there is another risk worth considering: not spending enough of your wealth while you can enjoy it.

Retirement planning is not about preserving as much capital as possible. It is about finding a level of spending that gives you the lifestyle you want while keeping you financially secure for the years ahead.

This is where cash flow modelling can help. By looking at different scenarios, you can see what could happen if you spend more in your early retirement years, investment returns are lower than expected, or your costs increase later in life.

It cannot predict exactly what will happen. But it can give you a clearer picture of what you can afford and help you make decisions with greater confidence.

Think about retirement in three phases

Thinking about retirement in phases can make your financial plan more realistic. The way you spend and manage your money is likely to change over time, so your financial plan should be able to change with you.

1. The active phase

In the early years of retirement, you may be at your healthiest and most independent. This could be the time to travel, spend more time with family, take up new hobbies, move home or live between countries.

You may spend more during this phase, and that is fine if your financial plan allows for it.

2. The settled phase

As retirement progresses, life may become more settled and your spending more predictable. Your focus may shift towards a reliable income, managing your investments, tax planning and keeping your financial affairs simple.

Regular reviews can help make sure your plan still fits your life.

3. Later life

Later on, healthcare, potential care costs, accessible savings and estate planning may become more important.

Having enough cash available, appropriate protection, up-to-date wills and powers of attorney, and a clear plan for passing on your wealth can provide peace of mind.

The important thing is that your retirement plan does not have to stay the same for 30 years. As your life changes, your financial plan should change with it.

Retirement financial planning across borders

For South African expats and internationally mobile clients, retirement financial planning can be more complex because wealth and financial commitments may span multiple jurisdictions.

You may have UK pensions or ISAs, South African retirement annuities or living annuities, offshore investments, property in more than one country and family members overseas. Your tax residence may also change during retirement.

As a result, when and where you draw your retirement income can matter as much as how much you have accumulated

Drawing from a South African living annuity, accessing a UK pension, selling an investment, transferring money offshore, or paying down a mortgage can each have different tax, investment, and estate-planning implications.

The order in which you draw from different assets may also affect your overall position. These decisions are best considered as part of a wider cross-border financial plan rather than in isolation.

For example, preserving a pension for another decade may appear financially attractive. But if doing so means missing the years when you are most able to travel, support family or pursue long-held goals, it may not represent the best overall outcome.

The most tax-efficient decision is not always the decision that best supports the life you want.

Questions to ask about your retirement plan

When reviewing your retirement plan, consider:

• What do I want the first 10 to 15 years of retirement to look like?
• Which experiences are important to achieve while I am fit and mobile?
• How much capital should I retain for longevity, healthcare and potential care costs?
• Am I preserving wealth because I need to, or because spending it feels uncomfortable?
• Are my pensions and investments structured around how I actually expect to live?
• Could a change in tax residence affect my retirement income or estate?
• Have I considered how my wealth will eventually pass to my family?

These questions can be more useful than focusing solely on whether your portfolio achieved a particular return last year.

Investment performance matters, but its purpose is to support your financial security and give you choices.

A balanced strategy for international wealth

A successful retirement plan is not about spending aggressively early on, nor is it about preserving capital at all costs.

It is about balance.

That means maintaining appropriate cash reserves, investing appropriately for long-term growth and income, managing investment and longevity risks, planning for tax efficiency and reviewing your strategy as your circumstances change.

For internationally mobile clients, it also means coordinating pensions, investments, tax, property and estate planning across borders.

Your money needs to last for your entire lifespan.

But it also needs to work for you while you have the healthspan to enjoy it.

Your retirement plan should provide more than financial security. It should give you the confidence to use your wealth while you are healthy enough to enjoy it. Our cross-border financial advisers can help you understand your options and build a retirement strategy around your goals. Get in touch on +27 (021 657 1540 (SA) or +44 (0) 20 7759 7519 (UK) or at [email protected]