Reviews and Ratings for Financial adviser Chris Wheatman, Lancaster

Revealed: How long will you spend in retirement as more people than ever reach 100?

When you’re nearing retirement there are a lot of big decisions you need to make. From when to retire to how much income to take from your pension, how long you will spend in retirement is a crucial piece of information. And it’s not something you should put off thinking about until you’re ready to retire.

Understanding your life expectancy means you can plan more effectively.

It can inform how much you should be saving to reach your goals during your working life, as well as how to use your pension and other assets when you retire.

The average retiree will need to plan for 2 decades in retirement

Data from the Office for National Statistics (ONS) shows average life expectancy, which can give retirees an estimate of how long they’ll spend in retirement.

People that are reaching the State Pension Age this year have a life expectancy into their 80s.

  • A 66-year-old man can expect to spend 19 years in retirement with a life expectancy of 85.
  • A 66-year-old woman has a life expectancy of 87, meaning their assets would need to last for 21 years.

For workers that are still years away from retiring, life expectancy could be higher. Understanding how far your pension and other assets will need to stretch is crucial for building a sustainable income.

While an average life expectancy for your age can give you an idea of how long your pension will need to last, many people will live longer than this. If you rely solely on the average life expectancy when planning, you could face a significant financial gap.

Do you need to plan for a 100-year life? There were 52% more centenarians in 2021

It wasn’t that long ago that it was rare to celebrate your 100th birthday. Today, it’s become far more common.

According to the ONS, there are more people than ever aged 100 and over living in the UK. In 2021, the number of people celebrating the milestone increased by 52% when compared to a year earlier.

The sharp increase is partly attributed to the baby boom following the first world war. Between mid-1919 and mid-1920, there were 45% more births than the year before. However, healthcare and quality of life improvements also mean more people are marking their 100th birthday with a letter from the Queen.

If you lived to 100, would you have enough money to live securely?

As the number of centenarians rises, it’s become important that retirees consider how they’d cope financially if they reached 100. It could mean spending four decades in retirement.

Planning for a longer life doesn’t just mean ensuring your pension withdrawals are sustainable for four decades. A longer life means you’re more likely to need some form of care.

It’s important to think about what you would want if you needed some support and the potential cost of this. Setting aside a proportion of your wealth for later-life care costs can give you peace of mind.

A 30-year retirement may not be something you expect to consider, but the statistics highlight that it could be more common than you think.

  • A 66-year-old man has a 1 in 10 chance of reaching 96.
  • A 66-year-old woman has a 1 in 10 chance of reaching 98.

A 100-year life isn’t going to be that rare for people retiring today.

Younger generations are even more likely to reach 100. A 40-year-old woman has a 1 in 10 chance of reaching the milestone.

3 practical things you can do to make sure your assets last throughout retirement

As people live longer lives and spend more time in retirement, ensuring that your pension and other assets will last is essential. Here are three things you can do to prepare for a long retirement.

1. Start saving for retirement early

The sooner you start preparing for retirement, the better.

By saving into a pension at the start of your career, the proportion of your salary that you need to contribute to reaching your goals is lower than if you put it off. It also means your contributions will be invested for longer, and hopefully deliver larger returns.

Don’t put off reviewing your retirement goals and in a pension.

2. Understand your guaranteed income in retirement

When you retire, you may benefit from some income that is guaranteed for the rest of your life. This may come from the State Pension or a defined benefit (DB) pension.

This income can provide you with a foundation to build on and offer some security throughout this stage of your life.

3. Access your defined contribution pension and other assets sustainably

If you have a defined contribution (DC) pension, you can make withdrawals when you wish from the age of 55, rising to 57 in 2028. However, when depleting your pension or other assets, you will need to consider how long they need to last and what is sustainable.

A longer retirement provides great opportunities to reach your goals and really enjoy your life after giving up work. However, it can also make managing your finances more complex, and we’re here to help you navigate this.

Whether you’re just starting to think about pensions or you’re already retired, please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.

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