How long will your retirement last?
I could have titled this blog post why retired couples should take an extra holiday next year!
It’s well known that we are all living longer, and whilst the rate of increase in life expectancy has slowed in the last few years, average life expectancy is still increasing.
From 2011 to 2016, average life expectancy for men increased by 4.2 weeks per year, and for women, by 1.2 weeks per year.
So, how long will our retirement savings need to last for?
The table below sets out average life expectancy at various ages for the UK as a whole:
You could conclude, at first glance, that your retirement savings just need to last until you are 90; but, of course, there’s more to the statistics than is obvious at first glance.
Firstly, the statistics only show the average life expectancy, and this disguises a wide range of results.
For example, the average 65 year old woman has a 1 in 4 chance of living to 96, compared to an overall average of 88.
And the figures for the UK as a whole hide significant regional differences. 65 year old women in Camden in London are expected to live until they are 89.6 years old on average; however, their Mancunian sisters are only expected to live until 80.9.
Sadly, moving to Camden at 65 won’t increase the length of your life!
Moreover, the figures for couples are quite different to those for individuals.
Research shows that, on average, we should expect one member of a couple to be alive at the age of 94, if they retired together at 65. But what is surprising (and maybe worrying) is that the statistics tell us that we should expect the first death in the same couple to occur at the age of 81.
This explains, to a large extent, why 3.6 million people over 65 live alone.
These figures may be interesting, and, possibly, scary, but for your retirement income plan, they are essential.
We know that none of our clients are Mr and Mrs Average, but they do help us to plan sensibly. They help us to recognise not only how long your pension funds will need, but also how your income might change during retirement – we can expect that on the death of the first partner, household income will reduce (the state pension may cease and other pensions are likely to reduce), and the retirement income plan needs to take account of this.
On a positive note, the statistics help us, and you, to recognise the risks of being too cautious about spending in retirement.
Most retired couples I meet want to have fun in the early years of retirement, and the life expectancy statistics are telling you to take that extra holiday next year!