Longevity: Where Health Meets Wealth

Advances in healthcare, diet, and lifestyle mean we're now living longer than at any other point in history. A 100-year life is no longer a rarity - it's a very real possibility for many. But with longer life comes a pressing question...

Will your wealth last as long as you do?

This demographic shift brings both remarkable opportunities and new complexities. So in this article, we explore why financial longevity planning is essential - and how we can help you prepare for the long life ahead.

1. A Holistic Financial Plan - Built Around You

Longevity planning isn’t simply about adding years to your retirement projection. It’s about making provision for a lifestyle you can enjoy and sustain - for decades.

At Forth Capital, we start by helping you to define your 'Financial Freedom' target number - the amount you will need to have accumulated to sustainably fund your ideal lifestyle, by the age at which you want to have the option to step back from work.

We factor in your goals, your chosen location, international assets, currency risk, future income streams and tax considerations. And crucially, we can model a series of projections for you, allowing us to discuss and put in place a robust plan that will help you to achieve your long term goals and sustainably enjoy the lifestyle you have envisaged in later life, with confidence and peace of mind.

> Learn more about how we use the latest cashflow modelling software to provide you with a clear visual projection of your financial plan

3. A Modern Retirement Strategy: Rethinking Pensions for Longer Lives

Traditional retirement planning assumed 10 - 20 years of post-work life. Today, dependent upon the age you plan to retire, you may need to fund 30 to 40 years of living expenses.

Optimising your various pensions - including UK personal and company schemes, Swiss pillar 2 and 3 assets if you've lived and worked in Switzerland, Superannuation contributions if you've worked in Australia, and your 401k schemes if your career has taken to the United States - is critical. We can help you:

• Consolidate pensions across borders

• Maximise tax efficiency based on your country of residence

• Align income drawdown strategies with longevity assumptions

• Manage investment risk with optimal growth potential

Let’s consider Alex, a 48-year-old executive living and working in Texas.

Alex wants to have the option to step back from work by the age of 58 and relocate to France, maintaining his current lifestyle.

Alex estimates that his annual outgoings in terms of his accommodation in France and living expenses, travel, entertainment, dining out and provision for healthcare will be €14,000 [£120,000] per annum.

Alex uses Forth Capital’s online tool to calculate his Financial Freedom Target Number.

Alex establishes that his Financial Freedom Target Number, giving him the option to step back from work at the age of 58 and sustain his desired lifestyle until the age of 100², is €3.4 million [£2.8 million].

Alex’s Savings and Investments
Alex has accumulated multiple retirement accounts over the course of his career:

• He has two UK company pensions held in Pounds Sterling (GBP) with the schemes provided by his previous UK employers, prior to him relocating to Texas - with a combined current value of £100,000.
• He has two 401(k) plans with a combined current value of $250,000 [£191,000] from previous roles held with employers in Texas.
• He is contributing to a 401(k) plan through his current employer in Texas – with a current value of $400,000 [£305,750].

Alex realises that his financial freedom target number is a higher value than his current savings, investments and pension arrangements are currently projected to provide for him by the age he wants to have the option to step back from work [58] - so to address that gap, he realises that he needs to speak to an international financial planner.

To create a plan for Alex, and bring this to life for him, Forth Capital’s UK-US-EU-qualified financial planner uses cashflow modelling technology to help him visualise the accumulation of his investments and savings up to the age of 58 and to illustrate how he can then drawdown income from those investments to fund his lifestyle [and provide for his later life healthcare costs] from that point onwards.

Financial Planning and Tax Considerations

Managing Alex’s US 401(k) Plans
Alex’s financial planner discusses with him the opportunity to consolidate his US 401(k) accounts and roll them into an Individual Retirement Account (IRA). IRAs typically offer a broader selection of investments and lower-cost investment options, enabling his funds to grow unencumbered by the higher fees and charges associated with 401(k)s. IRAs can also offer investments in Euros (EUR), to mitigate James’s exposure to currency risk.

To learn more about optimising your US retirement savings as a British expat, click here.

Mitigating Currency Risk
Alex’s UK and US pensions held in Pounds Sterling (GBP) and US Dollars (USD) respectively, could potentially benefit from being converted to Euros (EUR) to align with his expenses in France. Currency fluctuations could otherwise negatively impact the potential future value of these pensions over the course of the next 10 years. Since 2001, for example GBP has fallen in value by 24% in relation to EUR³. Working with his international financial planner James could mitigate this currency risk by transferring his UK pension funds into an international SIPP held in EUR rather than GPB, and his US 401(k)s into an Individual Retirement Account (IRA) held in EUR rather than USD.

To learn more about managing currency risk and its potential impact on your UK pension if you plan to retire abroad, click here.

Assurance Vie as a Tax Efficient investment and estate planning tool
Alex could also potentially benefit from an 'Assurance Vie' policy when he moves to France, a flexible and effective investment and estate planning solution; generating tax-deferred growth and providing the flexibility to withdraw funds when needed - as well as providing him with an effective estate planning solution, reducing the inheritance tax payable by beneficiaries.

To learn about the benefits of Assurance Vie as a British Expat in France, click here.

Alex’s financial planner then creates projections of different scenarios, to show him how making different levels of contributions to his investments and pensions, stepping back from work slightly later, semi-retirement, or introducing an additional passive income stream, and the adjustments to his assets detailed above, could potentially enable him to hit his financial freedom target number even earlier and make a positive impact on the lifestyle he would be able to sustainably afford in later life.

Alex is now on track to achieve financial freedom by the age of 58, confident in the knowledge that he will have the option to step back from work on his own terms, with the peace of mind that his financial future and financial legacy is secure.

Understanding the Inheritance Tax Implications of returning to the UK
Alex's international financial planner also makes him aware that if he should decide to return to the UK, then they must carefully plan for the implications this could have in terms of his UK tax exposure. Re-establishing UK tax residency could, for example, expose Alex's worldwide estate to UK inheritance tax (IHT) at 40%, and gains from the disposal of any assets could result in a 24% Capital Gains Tax charge. By working with his international financial planner, however, he can strategically manage his residency status and assets to minimise his UK tax exposure.

To learn more about UK tax-residency click here and to download our Statutory Residence Test Flowchart Guide, click here.