A recent report has suggested that while UK life expectancies are generally rising, we’re in worse health than previous generations.
Medical and technological advances mean that baby boomers are living for longer, putting additional strain on their retirement funds. Not only that, but they’re also in worse health than previous generations, increasing the need for later-life care, and its associated costs.
Keep reading to find out why your life expectancy, and years spent in good health, are crucial factors in your long-term retirement planning.
We’re living for longer but spending more time in poor health
According to the Office for National Statistics (ONS), the number of centenarians in England and Wales has more than doubled since 2002, to more than 15,000. In 2022, FTAdviser data suggested that the number of us reaching 100 could reach 29,000 by 2041, a rise of around 78%.
A Brit retiring at 65 and living to 100 would need to plan for a 35-year retirement. But even an average life expectancy means budgeting for 20 years without any work-based income.
Now, a global study, reported by the Guardian, has found that those born after the second world war are reaching their 50s in worse health than previous generations.
Despite increased awareness of the benefits of healthy eating and exercise, and medical and technological advances, conditions like obesity, type 2 diabetes, cancer, and heart problems are affecting people at younger ages.
Laura Gimeno of University College London (UCL), lead author of the report, confirms there is evidence of a “generational health drift”, which could have worrying financial implications as life expectancies continue to rise.
Factor longevity into the accumulation and decumulation phases of your retirement
In October, the Telegraph reported that by 2040, nearly 3 million pensioners will have insufficient retirement savings to cover their needs. That is pensioners whose living standards will fall below the “basic” level set out by the Pensions and Lifetime Savings Association (PLSA) or who will retire with less than they expected and face a surprise shortfall.
Long-term financial advice and retirement planning can help to ensure that you enter retirement with the pension pot you need. At Globe IFA, we can help you to achieve this by helping you to understand:
- What your dream retirement looks like
- How much this dream lifestyle might cost
- The proportion of your earnings you’ll need to put aside.
It’s worth remembering that it’s never too late to start thinking seriously about your retirement. If you’re approaching the end of your career and you’re worried about the size of the pot you have, and how long it might last, get in touch.
Think about your level of expenditure throughout retirement
It’s easy to think that the accumulation phase of retirement is the hard part, but managing your withdrawals once you retire can be tricky too.
You’ll need to acknowledge that your spending won’t be uniform (more on which later) but also be realistic about the length of time you need to budget for.
The pension – and the non-pension savings and investments – that you take into retirement is designed to last for the rest of your life. It stands to reason, then, that to budget effectively, you’ll need to think about how long that life might be.
Speaking to an advisor can help you plan your retirement based on your desired lifestyle and life expectancy. We can also show you the impact of future decisions, from saving more or working for longer to downsizing or factoring in the cost of later-life care.
You should factor in later-life care costs and contingencies if care isn’t needed
You might find that your outgoings are higher in the early, active years of retirement but that you start to slow down and spend less as your retirement progresses. Later still, ill health could strike.
Trying to find the money to fund later-life care if you haven’t already factored this into your retirement budget will be tough. Care is expensive and could eat up your fund quickly, meaning you run out of money when you need it most.
Carehome.co.uk confirms that the average cost of residential care is currently £60,320 a year, rising to £73,320 annually, on average, for self-funded nursing home care.
Knowing the money is there if you need it provides peace of mind. We can also help you to develop a contingency so that the money is put to the best tax-efficient use if care isn’t needed. This could be especially important following changes to how pensions are treated for Inheritance Tax purposes, which were made in the Autumn Budget.
Get in touch
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you manage your retirement savings and expenditure.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
