Impaired life expectations do have a (very) faint silver lining financially. Insurance companies in the UK offer significantly better annuity rates for people with health issues. Although it is less common these days, some people purchase an annuity with a pension lump sum to provide them with a guaranteed income for life. If your health has been compromised, the income you could buy with an annuity might be much higher than if you were in good health.
If you have suffered a stroke or heart attack, your annuity income could easily be 75% more than for a healthy person. Even being a regular smoker, drinker or having a high body mass index can increase your annuity income. An estimated 60% of those eligible to buy annuities qualify for some sort of enhanced rate.
Annuities are enjoying something of a renaissance because the income they pay is also heavily dependent on long-term market interest rates, which have risen sharply this year.
The downside of purchasing an annuity is that your heirs will inherit less than they might otherwise have done. For that reason, few financial advisers will recommend buying one if end of life might be imminent.
Ill health also has implications for how you manage your retirement savings. As a rule, anything that impacts your earning ability should cause you to become more conservative with your investments. The most powerful pension planning tool is being employed and having the option to continue working if your savings are insufficient for retirement. If your capacity to earn is reduced or removed altogether, this needs to be reflected in how much risk you are prepared to take with your existing savings.
The low likelihood of reaching retirement age in good health begs another question. Should you retire early to avoid this problem in the first place? The data are surprisingly ambiguous on this. Some studies have purported to show that retiring early not only increases overall life expectancy but can also increase healthy life expectancy. But one famous study suggested exactly the opposite -- that working longer led to greater life expectancy. There is no straightforward answer to this question.
What is clear though, is that financial worries can be compounded by boredom and dissatisfaction, leading to post-retirement depression. This is another reason why people should prepare both mentally and financially for retiring earlier than they might otherwise expect.
More positively, if you find your job stressful and you have made adequate financial provision, early retirement might indeed be the healthy option. There are, after all, no prizes for being the richest person in the graveyard.
Stuart Trow is a credit strategist at the European Bank for Reconstruction & Development. He is also a pensions blogger, radio show host and member of numerous retirement, finance and audit committees.