More time to live your life means being able to do more, but it also might involve adapting your financial plan.

With advancements in healthcare, increased awareness of sustainable lifestyles, and breakthroughs in medical science, the likelihood of many people living to 100 may be greatly improved.

Though this means you may have more time to travel, see family, and do the things you enjoy, an extended lifespan can bring about some unique financial challenges.

Fortunately, there’s plenty you can do ahead of time to ensure your financial plan stretches for as long as you need it to.

Life expectancies at birth have been slowly increasing over the years

Centuries ago, the average life expectancy at birth was considerably shorter than it is today.

In fact, the University of Cambridge (UoC) suggests that the average life expectancy at birth varied between 35 and 40 years between 1600 and 1800. That being said, the most common age for adult deaths was still around 70, as the overall average was significantly lowered by high infant and child mortality rates.

By 1960, the UoC notes that life expectancy was around 72. Today, the research states that most people die above the average rate, with the most common age at death being almost 90.

Indeed, living into your 80s and 90s is swiftly becoming the norm. The Office for National Statistics (ONS) states that life expectancy at birth was 79 years for men and 83 years for women between 2021 and 2023.

The ONS also notes that there are an estimated 14,850 centenarians – people who lived to see 100 – in England and Wales, which is more than double the number that existed in 2002.

Your precise life expectancy may be determined by your health and environment

Life expectancy can vary by region, health, and genetics, but the ONS can provide an estimate based on the country’s averages. For example:

A 40-year-old man has the following potential life expectancies:

  • An average life expectancy of 84
  • A 25% chance of making it to 94
  • A 10% chance of living to 98
  • A 5% chance of reaching 100

A 40-year-old woman has the following:

  • An average life expectancy of 87
  • A 25% chance of living to 96
  • A 9.3% chance of reaching 100

As you can see, the potential for exceeding the average is not insignificant. However, your health and economic situation can play a significant factor in your overall longevity. Your lifestyle and access to medical care are also important factors to consider.

This means that the questions you’d normally ask yourself when considering your retirement plan may need some supplementation.

Ordinarily, you’d want to ask yourself:

  • How long might I live after retirement?
  • How much money will I need to fund my lifestyle?
  • How much do I need to save to get there?

Now, you may want to consider adding two more questions to your list:

  • Am I likely to live longer than my estimated life expectancy?
  • If I did, would I manage financially?

Keep in mind that even an additional five years could have a notable effect on your finances, particularly if you need social or residential care later in life.

The longer you live, the more wealth you might need for a comfortable retirement

The cost of a comfortable retirement is rising, and will likely continue to do so as inflation continues to increase.

Here’s an example of how an average retirement income might look.

  • Currently, the Pensions and Lifetime Savings Association estimates that you would need an annual income of £43,100 (as a single person) to live a comfortable life in retirement
  • If we subtract the full new State Pension for 2024/25 of £11,502.40, you would need to be able to generate £31,597.60 from your pensions annually
  • So, a 40-year-old man retiring at 65 would need to accumulate around £600,354.40 in total to live a comfortable retirement up to the age of 84. This doesn’t include the State Pension
  • However, if that same man lived to 90, he would need £789,940. If he lived to 100, he would need about £1.1 million
  • With women statistically living longer than men, they might need even more
  • If you require care in your later years, your costs may rise significantly

Ultimately, the difference between 5 and 10 years is significant, but there are ways to manage your finances that could make it possible to cope financially.

3 productive ways to ensure your pension will last your whole retirement

1. Increase your pension contributions

One key step towards securing a retirement that could stretch for years beyond your plan is to maximise your pension contributions. Even small, incremental increases can make a substantial difference over time, thanks to the power of compounding.

As an example, according to Aviva, a monthly investment of £100 over 20 years could be worth £35,400. If you increased that to just £150, your investment could be worth £53,100.

You might even find yourself with a lump sum of money, perhaps from an inheritance, a bonus, or the sale of an asset. What you choose to do with this money is entirely up to you, but it may be worth considering the effect it could have on your existing retirement portfolio.

Let’s say you received £20,000 from a family member and decided to invest it. After 20 years, assuming 4.5% growth, your money could be worth £41,500.

If you were to add this sum to an existing portfolio, you may benefit even more from the impact of compounding.

2. Make sure you understand your tax liability

Taxation is a reality of retirement, and not understanding your liability could have a significant effect on your retirement wealth.

Remember that your various income sources including the State Pension, private pensions, and investment income might be taxed.

In the UK, retirees usually benefit from the Personal Allowance, which is the amount you can earn Income Tax-free each year. This rule applies to any taxable pension income you may take. It stands at £12,570 as of 2024/25 and is frozen at this level until 2028.

Then there’s your pension commencement lump sum (PCLS), often referred to as the “tax-free lump sum”. Typically, you can take up to 25% of your defined contribution pension pot as a tax-free lump sum (up to the Lump Sum Allowance, standing at £268,275 in 2024/25). Beyond this and your annual Personal Allowance, Income Tax usually applies.

Seeing as the tax retirees pay is very complex, it’s important to take advice as you head into retirement.

3. Regularly review your retirement plan

Retirement planning isn’t a one-time event; it’s an ongoing process. Life circumstances, economic conditions, and personal goals can all change over time. This means it’s important to regularly check in with your retirement plan to ensure you’re still heading in the right direction.

Consider factors such as investment performance, changes in your health, and shifts in your spending habits. It’s important here to ensure that your plan remains flexible enough to accommodate unexpected events, including living longer than you thought you would.

Whether you’re concerned about outliving your retirement plan or simply want to review your financial situation, we’re here for you.

Get in touch

We can help you tax-efficiently and sustainably plan your finances to ensure you have the wealth you need to support a long, healthy life.

Please speak to your usual Dodd Wealthcare contact. Alternatively, please email info@doddwealthcare.co.uk or call 01228 530913 / 01768 864466.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

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 performance.

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. 

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