Life expectancy: Don’t let yourself run out of money too soon

Investment Sense News

Over-50s could be underestimating their own life expectancy by up to eight years, according to research by Retirement Advantage. The study shows that 78% of people believe their life will be much shorter than official data predicts.

Both men and women aged 50 to 64 expect to live until an average age of 82, but according to national statistics, the life expectancy for:


  • Men is 88
  • Women is 90

Whilst it may sound like good news to find that you could live longer than you thought, it can be very bad from a financial viewpoint.

No longer a pension for life

The popularity of Annuities is falling. Gone are the days when the only option for retiring involved purchasing a plan which guaranteed a set income each year until death – no matter how many years away. Thanks to the introduction of Pension Freedoms and income drawdown accounts, retirees are now able to withdraw their pension on their own terms.

But making it last is now harder.

Put simply, your pension needs to provide an income for the rest of your life. If you plan your finances on a life expectancy that is too short, you could end up with no income in later years, when you really need it.

Income in later life

Research from the International Longevity Centre – UK (ILC-UK) shows that, for current 64-year-olds, almost half of their retirement years will be spent in poor health, or with a disability. Women spend approximately nine and a half years of retirement in pain or suffering from illness, whilst men will experience an average of eight years’ illness in retirement.

Financially, the years spent in ill health could be the ones which incur the highest living costs. Whether it’s medication or full-time care, ill health can be expensive, which means that you need to ensure that you have enough left in your retirement pot to support you, no matter what later life brings.

Effective planning

There are three key steps to take to ensure that your pension and savings can support you throughout retirement – however long it may be. These are:

  • Getting organised: Before doing anything else, you need to know what you can expect to have when you retire. This includes:
      • Your State Pension, which you can get a forecast of here
      • Your savings and personal pensions
      • Any workplace pensions you have contributed to
      • Factoring in inflation
  • Once you have this calculated, you can estimate your living expenses to see how much you will need to live on. You can then determine how long your current retirement income will last and how much extra you can afford to spend each year.
  • Remaining vigilant: Throughout your retirement, your spending priorities may change. You may find yourself needing to pay for medical treatment and social care, or it may be nicer things, like the once-in-a-lifetime trip you’ve always dreamed of. Either way, it is important to keep a flexible attitude toward your pension planning, without affecting your quality of life in the future.
  • Taking advice: Independent financial advice is crucial at this point in life. Having an expert on hand to explain the ins and outs of pension and retirement planning means that you can be safe and secure, knowing that the decisions you have made are backed up by a qualified and experienced professional.

For more information or to discuss your pension and retirement planning needs, contact Sarah or Bev on 0115 9338433.