Blue Zone 2.0: Living to be 100, part 3

Singaporeans are living longer. Back in 1990, there were only about 50 Singaporeans still living at 100 or above. As of 2018, the number was around 1,200, and as of 2020, the number was around 1,500. Thanks to advances in medical science, better nutrition, and better all-around social support, more of us can expect to be around when the first HDB flats finally go to $0. But this gives rise to an important question: how are we going to plan our will or CPF nominations, if we need more to live that long?

The impact of reaching 100+ on your estate planning
Most people plan to “cross over” by the time we’re around 80 or 90, which is the average life expectancy. However, in case we stick around longer (whether we choose to or not), some of the following factors come into play:

• Retirement savings may run out
• Family dynamics don’t stay the same
• Future tax situations may not be the same
• Legacy assets have a longer time to appreciate

1. Retirement savings may run out
Here’s a simple fact: if you plan to live till 90, but you’re around and lively as you reach 100, then you’ll probably have less to leave behind. Here’s a simplified example:

Say you had $1.5 million when you retired, and you started using this fund the moment you retired at age 65.

You had planned to be around for 25 years. This would leave you with about $60,000 a year, and you decide that’s a bit more than you need for a simple retirement of kaya toast and the occasional coffee. So you allocated $500,000 to keep aside for your children, grandchildren, etc., and $1 million to live off - that should give you $40,000 a year. Nice!

25 years on, you’ve spent $1 million… but one issue: you’re still alive, and perhaps you will be for a few more years (maybe even another decade). Your mind and body are just that solid.

At this point, you may have no choice but to tap the $500,000 you set aside for your children, grandchildren, or others. At the age of 100+, it’s likely that you may need a live-in helper, or face mounting medical expenses. If you made the decision to buy a really old home, there’s even a risk that the 99-year lease on your home may run out, requiring other accommodation like a nursing home.

(This is also a simplified example, where we’ve excluded the impact of inflation - that would eat even further into your legacy)

2. Family dynamics don’t stay the same
Let’s face a sad but real possibility: if you live to 100+, there’s a chance you may outlive some of your children. If you had a child at age 27 for example, they would be around 73 by the time you reach 100.

You can probably see how this would require you to revise your estate planning. At this point, you might reallocate the inheritance to your children’s surviving spouse, your grandchildren, or - if there’s no other surviving relatives - then maybe an organisation of your choice (e.g., a charity, a religious institution, or some other cause you support).

Even if your children are still alive, it may be time to reconsider the family dynamics. For example, what if your children are fine at age 73, own a nice property, and have an annuity? This may also be cause to channel more of your legacy toward grandchildren (e.g., since your children already own a home, perhaps will the property to your grandchildren who don’t have one yet).

Family dynamics are not static, so planning your estate can never be a one-time thing. Be prepared to make changes, and if you do reach 100+ years old, it’s common if your will looks nothing like the original.

3. Future tax situations may not be the same
Case in point, look at property in Singapore: Way before 2011, you could will a condo or bungalow to your children without any consequence. In the old days, some retirees even set a condition that the children were not to sell the home (as they wanted it to be a family legacy, or to provide for other beneficiaries).

But if you do this in 2024, and your children inherit that property, they’d pay 20 per cent Additional Buyers Stamp Duty (ABSD) should they try and buy a separate home later. And if you set a clause that they can’t sell it, they may end up stuck there and unhappy.

Besides this, we don’t know if taxes such as property taxes will increase (thus making an inherited home more expensive to upkeep), or if in future there are new capital gains, inheritance taxes, or others.

This affects the manner of the assets you keep. For example, if capital gains taxes were ever imposed on assets like gold or silver, your children may gain less than you expect from such an inheritance.

There’s no real way to predict what laws the government will pass in the future - and if we’re talking about living to 100, this is a long time for economics and policy measures to change. Again, it’s important to stay adaptable, and be ready to revise your legacy planning as needed.

4. Legacy assets have a longer time to appreciate
We’ve been a bit “doom and gloom” here, so let’s look at a potential upside: if you live till 100+, then many of the assets you leave for others - such as your home, precious metals, a stock portfolio, etc. would have had many decades to appreciate. It’s possible that the original 20-year investment horizon has now become 30 or 40 years.

While there’s no guarantee on asset values, it’s generally true that long term capital gains can be improved by longer holding periods. Likewise, assets such as precious metals and real estate tend to appreciate more the longer they’re held.

This means that, as you reach your 100^th birthday, you may find your (hopefully freehold) house that you bought for $3 million in your younger days is now worth three or four times that amount.

If your children already have their forever homes at this point, maybe it’s time to liquidate the property instead, and leave a more generous cash inheritance to your beneficiaries. In this way, constant estate planning can help to fully maximise your assets, and cater to your family’s evolving needs.

But will I still be sharp enough to plan my estate at 100+?
If you are in the pink of health then it is a simple process - you can talk to the lawyer and do it on whatever high-tech gadget we have by that point (maybe by that time, there’s no need for even a lawyer and you can do it digitally. We can dream).

But if you’re worried that you may suffer some cognitive decline, it may be wise to appoint someone else to manage your legacy planning at that point, such as one of your children, a law firm you trust, etc. So do consider when setting up your will, as a contingency plan.