Planning for the future as life expectancy nears 100

Recently, I read “The 100 Year Life” by Gratton and Scott, two UK academics. It’s a thought-provoking read.

My children are still in education but with rising life expectancy, their lifespan could be very long indeed.

For children born in the Western world today, there is more than a 50 percent chance of living to be over 105. A century ago, the chance was less than one percent.

If you are now 20 you have a 50 per cent chance of living to 100. If you are 40 you have an even chance of reaching 95.

A child born today is likely to work into their mid-70s, and possibly beyond.

The historical three-stage life of education, work, retirement is changing and will continue to do so.

How do you plan for such a long lifespan?

That’s the big question. Without realising it, we are used to thinking of life in three stages.

Growing up and education to about the age of 20; then working to 60-65; then retiring and enjoying our free time, until frailty impacts our activity and ultimately our death.

Our time in this last stage is changing compared to our parents and grandparents.

We are expecting to live many years beyond our retirement compared to previous generations.

However, pensions were only ever meant to pay out for 10-15 years. As we saved through 40 years or more of our working life, it was achievable to fund our initial expectations of retirement.

So how do we fund another 40 further years beyond work; our longer-than-expected years of retirement?

Reality shows that many of today’s 60- to 80-year-olds are not retiring.

Many continue to work, often part-time. They sell the skills they have built over the years and enjoy the best of both worlds.

Flexible pensions allow them to take a smaller part of their pension and add earned income.

They enjoy the sense of purpose of continued working, the social interaction with business colleagues, a satisfactory income, and yet still have some time to relax.

This is the new world of our older generation today. They need professional financial planning assistance to get this programme in motion.

Once you have drawn down even a small part of your retirement pension, shouldn’t you be able to top up your pension pot again?

Well, depending on the structure, and subject to certain conditions and limits, you can.

In my role as an independent financial planner I am often discussing goals and aspirations with those who are preparing for retirement, and are aware that they need to start planning before it is too late.

But, just as important, are the conversations with younger individuals, including those who are at an early stage in their careers, who realise that it is never too early to start planning for the future, and also more necessary than ever before.