Financial planning

Outliving our expectations

Colin Dyer

‘I see a fruitful journey in your future’, ‘you have a long, successful path ahead of you’, or even ‘your life will be cut short by a tragic accident’ are predictions we might all recognise from visits to our local Mystic Meg. But have you ever considered how long you might live in a more serious manner?


Whilst I’m not advocating morbid conversations round the dinner table, it can be surprisingly important to challenge our subconscious assumptions about how long we will live, and to reconsider the way that we plan for this.

Research shows that a large majority of people underestimate how many years they will have in retirement. The average length of retirement is 25 years, but just over half of those asked in the research thought they would be retired for 20 years or less. This is linked to how long we think we’ll live: 68% of people thought that the maximum age they would live to would be 85. However studies show that at least half of people currently at retirement age could expect to live to the grand old age of 90!

This means that over half of us could be cutting several years off our life plan, and consequently our financial plan, without realising it. Whilst it’s easy in the midst of everyday life to forget about our nineties, it’s still critical to plan for them.

So what are some of the steps you can take?

1. Review the routine

It is often easy to assume that our everyday spending in retirement will remain roughly the same as it was in our working lives. What we spend on golf trips, visits to see the kids, new gardening tools, will be offset by what we used to spend on the commute, work lunches, the morning (and afternoon!) coffee.

But it’s always worth checking whether this is really the case. Especially with 34% of people in or near retirement admitting that they don’t know how much, in total, they will need to fund their retirement*.

A simple way of assessing your needs would be through using a budget planner. This will give you a good head start in looking at your essential and discretionary spending now, which you can then compare to what you envisage in retirement. Getting this down in black and white can really challenge your thinking on what is required.

2. Understand your spending

Taking this one step further, it is worth noting that often retirees find their expenditure higher in the first years of their retirement. Going on nice holidays, maybe buying a new car or home renovations can be costly, but people often find these costs tailing off as they settle into retirement. This can then build again as the need for long term care can become a necessity in later years.

Once you’re ready to enjoy the fruits of your labour, it’s important to think through what you want from your ‘golden years’, and how your assets can best make that happen for you. Round-the-world-trip or reading a book on the patio, understanding your income and expenditure, both the essential and the discretionary, will be vital in helping you plan your financial future.

We all know the saying about ‘when you assume’, but here it really can be best to. Assume that you will live to 100, and draw out your plan from there.

3. Consider the challenges

Whilst I hope that retirement really will be all sunshine and roses, it is inevitable that some of us will hit some speed bumps along the way. Various studies show it’s likely that more than half of us will need long-term care in later life.

There’s also always the chance that a family member or loved one will require care or help with their health. Children or grandchildren might need help on the property ladder, with a business venture or with any number of issues that even Mystic Meg couldn’t predict. Dealing with uncertainty is a part of life for all of us, and it’s important that we plan for any amount of uncertainties that 100 years could present us with.

4. Reassess the risks

As we all know, investing can be a long-term game. And it can be a risky business. Whilst there’s an investment option to suit everyone’s attitude to risk, there are several milestones in your life at which it is sensible to have a thorough review.

When you’re approaching retirement is a prime example. In the past, a traditional tactic was to reduce risk in the run up to retirement before buying an annuity. 2015’s pensions freedoms, however, have changed this. Whilst an annuity would be guaranteed to see you through to your 100th birthday (and your telegram from the Queen!), it is not always the best value solution for everyone.

There are now other options out there for your retirement savings, and whilst investments can go down as well as up, they can be a risk worth taking. However if you do opt for something other than an annuity, it is possible that you could run out of money – so think carefully before deciding.

5. Speak to an expert

With the best will, tea leaves and tarot cards in the world, it’ll never be easy to predict the future. What you can do, however, is try to protect it.

If you think your current financial plan might not stretch as far as it should, or you have any other questions about your financial future, my best advice is to talk to your financial planner about it. If you’ve yet to find a financial planner, and you think that an initial discussion would be of benefit to you, we’d be delighted to help.

*Source: Zurich UK, April 2015

The information in this blog should not be regarded as financial advice. Please remember that the value of your investment can go down as well as up, and may be worth less than you paid in. The information here is based on our understanding in March 2018.