Naz Financial

A Personal Financial Blog from Naz Miller

Retirement Income: Can You Afford to Live Longer?

We all need to consider retirement income when planning for our older years. This blog considers 4 universal factors when planning your retirement income.

retirement income | take control of your retirement

It was 1965 when the Who first sang My Generation with the line ‘Hope I die before I get old’. Now the surviving band members considerably older, it seems their ambitions have changed. Roger Daltrey is 74 and still releasing new music.

If you’re looking ahead to retirement income without a rock star’s bank balance, how are you planning it?

  • When do you expect to retire?
  • How long do you expect to live?
  • How will you pay for care?
  • Will you continue working past retirement age?

They’re important questions as they each affect your retirement income.

2017 Research from Retirement Advantage, a part of Canada Life, shows that, on average, people aged 55 to 64 believe their life expectancy to be 82 years. Yet for men, the national life expectancy is 88, whilst for the average woman it’s expected to be 90.

The same age group expect to retire just before their 65th birthday, which means that they are likely to be planning to financially support themselves through a retirement of less than 20 years. In fact, they could be relying on their retirement income for 23 years, or even longer.

 

Retirement Income Planning

Here are four important things that you should consider when planning your retirement income:

1.      Your Health Expectations

According to the International Longevity Centre, the number of years someone is likely to stay healthy is getting longer. However, it’s not growing in line with average life expectancy. Between 2000 and 2014, the gap between life expectancy and healthy life expectancy at the age of 65 rose from 6.4 years to 8.1 years for men, and from 8.2 years to 9.6 years for women.

As your health deteriorates, living costs rise, of course. Many chronic illnesses and conditions can require home adjustments, equipment and medication which are not subsidised. This means that the cost of living can increase in your later years

 

2.      Care in Your Old Age

This leads us to considering care and the costs of that care. As the state is finding it increasingly difficult to fund social care for the elderly, the burden is falling more on the recipients of that care.

If long-term care is required, the cost of living will increase. In 2017, the average cost of care exceeded £1,000 per week in some areas of the country (Source: UKcareguide). In general, it’s unlikely that your standard retirement income will cover such costs.

 

3.      Retirement Income from Pensions/Saving

The way you access your retirement income will influence how long your money is able to last. For example, if you were to purchase a guaranteed income, you could be sure that you will have a regular income. Though it will not necessarily be enough to cover the rising costs which tend to develop in later life. You can now consider drawdown models of income with a ‘pot’ that continues to be actively invested.

 

4.      Will You Continue to Work?

The days of ‘cliff-edge’ retirement seem to be over. This is where you’d work full-time up until a fixed date, when you’d stop altogether. Nowadays, it is more common to work beyond the State Pension Age. The number of self-employed individuals aged 65+ has increased more than any other age group in the past decade. (Source: Office for National Statistics)

Many people aged 65+ are turning to part-time work, self-employment and consultancy. This is to both stay mentally active and bring in additional retirement income. 44% of 50-64-year olds plan to continue working part-time during retirement, whilst a small number (6%) expect that they will never be able to stop working full-time. (Retirement Advantage)

 

There are other considerations, of course, such as how you want to spend your retirement income, how you minimise the tax liability of your retirement income, whether to defer taking the State Pension, and others. They’re for another time. I hope this has given you food for thought about your retirement income and will it be enough?

 

There are no easy answers with saving for retirement, as everybody has a diverse set of goals, ambitions and dreams. Let alone attitudes to risk. One easy answer, however, is to take professional independent financial advice. A good adviser will help you work out what is important for your later years. Then you can put a plan in place to achieve it.

For more information on saving for retirement (whether that be by pension, property or other means), contact me, Naz Miller on 07786 653 359 or via the contact section of this blog site.

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Naz Miller

I'm Naz and I'm a Financial Adviser. Prior to working in private practice, I spent 34 years working at Lloyds Bank in Cambridge and surrounding areas. My work has always focused on helping clients achieve their long-term financial objectives.

Glossary of Personal Financial Terms

AAA Rating

In short, AAA ratings (‘triple-A‘ ratings) are the highest credit rating available for an investment, such as a bond or company.

AAA ratings are issued to investment-grade debt that has a high level of creditworthiness with the strongest capacity to repay investors.

Similarly, the AA+ rating is issued by S&P (Standard and Poor) and is similar to the Aa1 rating issued by Moody’s. It comes with very low credit risk and indicates the issuer has a strong capacity to repay.