Why longevity matters when planning for your retirement

Retirement is traditionally seen as a time to relax and enjoy the rewards of your hard work. You may already have an idea about the kind of things you want to do, from mastering your hobbies to spending more time with loved ones.

In recent years, life expectancy has increased significantly due to advances in healthcare and improvements in our lifestyles. According to data from the Office for National Statistics (ONS), the average man in the UK can expect to live until 79, while the average woman lives to be around 83.

This means that you’ll probably be able to enjoy a much longer retirement than previous generations. Of course, this may also mean you’ll need a greater amount of wealth to support your desired lifestyle for longer.

When it comes to building a long-term plan, longevity is one of the most important factors that you’ll have to consider. Read on to find out how it could affect you.

People are living longer due to advancements in healthcare and technology

According to the ONS’ life expectancy calculator, the average 55-year-old man typically lives until age 84, while a woman may reasonably expect to reach the age of 87. This means that if you retire as soon as you are able to, your pension wealth may need to last you for 30 years or more.

Of course, it’s important to remember that these are just the average figures. According to the calculator, a 55-year-old man has a 10% chance of reaching 97, while a woman has the same chance of reaching 99.

One of the main reasons we are living longer is because there have been substantial improvements in healthcare in recent years. Many illnesses, which would have been fatal only a few decades ago, are now survivable and this is helping more people to live longer.

In the same vein, healthcare professionals have been much more vocal about making lifestyle changes that can improve people’s health and wellbeing. For example, there is now much greater awareness of the dangers of smoking.

Furthermore, improvements in technology allow pharmaceutical companies to adapt much more quickly to potential problems, which can help to save lives. The rapid development of a Covid-19 vaccine by AstraZeneca in 2020 is a good example of this.

It’s important to factor in the impact of inflation on your wealth

There are many advantages to living a longer life, as having more time gives you more opportunities to see your loved ones, travel the world and master your hobbies. Of course, it can also present some issues.

One of the biggest issues is that you may need a greater amount of wealth to support you throughout retirement. This may mean that you have to invest more into your pension or reassess your investing strategy to achieve stronger returns.

You’ll also need to bear in mind how inflation will affect your wealth over time. Since it essentially eats away at the real value of your money, it’s important to factor this in when planning for retirement.

According to the Times, at the current rate of inflation, with the Consumer Price Index at 5.5%, it would take just 13.1 years for your wealth to lose half its buying power.

If you want to avoid this prospect, it’s important to have an effective investment strategy that suits your needs. This is where working with a planner can help you, enabling you to grow your wealth to counteract inflation without exposing yourself to unnecessary risks.

A longer life may mean you need to plan for greater care costs

Another issue of a longer life that you may need to consider is the impact of care costs. No matter how well you look after your physical wellbeing, as you get older you may find that you need more help and may require long-term care.

Depending on what type of support you need and how long you need it for, you may have to put aside a significant amount of money.

According to data from the non-profit organisation Paying for Care, the average cost of staying at a residential care home in 2020 was £34,994 a year. However, this rose to £48,720 for people who needed nursing care too.

If you don’t factor this in when planning your retirement, it could affect the financial wellbeing of your loved ones. Without some money put aside to pay for the costs of care, you may end up leaving them a smaller inheritance than you had desired.

Working with a planner can help you plan for a longer life

While nobody can say with any certainty how long they will live for, if you want to enjoy a longer retirement, then it’s important to make a thorough plan. This is where seeking professional financial advice can help.

When you work with a planner, they can help you to build your wealth more effectively, so you don’t have to worry about the risk of running out of money in retirement.

For example, they can help you to save for the future in the most tax-efficient way or assess whether your current investment strategy will give you enough for the lifestyle you want. This can give you much greater confidence that you won’t run into any unexpected issues.

If you want to plan for a longer life, seeking professional advice can help to give you greater peace of mind that you’ll have enough wealth to support you throughout your lifetime.

Get in touch

If you want to ensure you’ll be able to enjoy a comfortable and sustainable lifestyle in retirement, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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