Baby Boomers, Retirement, and Life Expectancy: The Role of AI in Shaping Tomorrow’s World
Some people may remember a BBC TV show, which first aired in 1965, that fascinated a generation of baby boomers. The show was called ‘Tomorrow’s World’ and it was hosted by the amazing Raymond Baxter, who was famously kicked out of Ilford County Grammar School for smoking!
Baxter joined the RAF at 18, where he became a fighter pilot in World War II, and later worked for Forces Radio before becoming the BBC’s motoring correspondent.
He became more popular with Tomorrow’s World, which started after Prime Minister Harold Wilson talked about the ‘white heat of technology’ at the Labour Party conference in 1963. He was very excited about new inventions, devices and concepts, and he inspired millions of young people, including me when I was just 8 years old.
This was a TV show that you couldn’t miss, a show where you could see live demonstrations of bullet-proof vests, flame-proof clothing, and other amazing products in the studio, such as the first home computers, light pens, touch screens, chip and pin features, digital watches and more. These innovations were shown in the mid-1960s.
Mr Baxter often told his audience that the show’s stream of technology that saved labour would change our lives so much that our biggest problem would be how to spend our free time. Humans would be free from boring work because robots and computer-based technology would do and finish everyday tasks, and make people live much longer and healthier lives.
Almost sixty years after Tomorrow World started, it’s fair to say that some gadgets, like home computers, have changed our lives, and life expectancy has increased by almost seven years for women and about six years for men. But not every gadget on TW became a life-changing invention, and the predictions of very long lives were not very accurate.
A two-day conference on Artificial Intelligence (AI) happened at Bletchley Park earlier this month.
Before the conference, Jamie Dimon, the Chairman and CEO of JP Morgan, the biggest bank on Wall Street, talked to Bloomberg TV. He has always supported AI, and Mr Dimon said: “People need to take a deep breath… Your children will live to 100 and not get cancer because of technology. And they’ll probably work only three-and-a-half days a week.”
Does that sound familiar?
Let’s imagine for a moment that AI is good and average UK life span increases by more than 20 years, to 103 for women and 99 for men. That’s great for our children and grandchildren, maybe, but this will not happen right away. Still, let’s think that AI’s first effect makes baby boomers live longer by about three years in the next 20 years. How could this affect their money?
One important factor to consider is how long a pension pot will last. Suppose a 67-year-old baby boomer has £170,000 in her pension and plans to withdraw £12,000 every year. She expects to increase the withdrawal amount by 2.5% annually and to earn a net annual investment return of 4%. With these assumptions, her pension pot will run out after 16 years, when she will be 83.
However, if an AI revolution happens and extends the life expectancy of boomers by three years, she will have to lower her annual withdrawal by nearly 17%, that is, to £10,000, to make her pension last for four more years, until she is 87.
No one wants to face a shortage of income in their mid-80s, but inflation has been eroding the savings and investments of many people in the last 18-24 months, leading them to dip into their pensions.
And by how much. In the year to April 2023, almost £13 billion of taxed income was taken out of private pensions, more than twice the amount in the 2016-17 tax year. This figure does not include the 25% that can be withdrawn from a pension as a tax-free lump sum.
Homeowners who are 55 or older have another option to increase their retirement income, whether they foresee a gap in their pension withdrawals or just want to enhance their lifestyle.
Some people might think that the simplest way to solve their retirement income dilemma is to downsize. ‘Let’s sell the house,’ they say, ‘make a big profit, take the money and move to a smaller place.’
But life is not that easy, is it? The property market has been stagnant for some time now, so getting a selling price that might have been easy 18 months ago is now much harder.
Besides, downsizing is not for everyone: leaving behind family and friends, as well as an activity or social circle that took years to build, can be a huge challenge, while that ‘smaller place’ could be far away, maybe 20 to 30 miles or more.
“Not everyone wants to sell their family home,” says Mark Gregory, chief executive of Equity Release Supermarket, the UK’s largest independent and whole of market equity release broker.
“Many people choose to use a financial product called a lifetime mortgage,” says Mr Gregory. “This allows homeowners to release a part of their home’s value as a tax-free lump sum. They don’t have to make any monthly payments, but more and more are opting to make flexible voluntary payments to reduce the interest and leave more inheritance for their beneficiaries.
Meanwhile, with all lifetime mortgage plans, the homeowner always retains full 100% home ownership and have the right to stay in the property until they die or move to permanent, long term care.”
The lifetime mortgage is paid back after one of these events, usually after selling the home. However, it is important to note that releasing equity could affect the homeowners’ eligibility for means-tested benefits.
Still, the tax-free sum from releasing equity from the family home can be used for anything, including increasing retirement income, home improvements and other lifestyle uses.
As Tomorrow’s World often showed, new technology can disappoint, but if AI helps to extend life expectancy, it might be wise to have a plan to fund those extra years.
If you want to learn more about the different equity release options then you’re in the right place, Equity Release Supermarket has all the tools you need to check how much you can borrow and at what rate before booking an adviser appointment.
When you are ready to talk to an equity release adviser you can be sure that all our advisers are whole of market and not tied to any lender, so you’ll always get the best product for your needs from lenders such as Legal & General, LV= and Aviva.
