{"id":17546,"date":"2024-03-19T10:48:00","date_gmt":"2024-03-19T10:48:00","guid":{"rendered":"https:\/\/cliftonnash.co.uk\/?p=17546"},"modified":"2024-03-22T10:28:29","modified_gmt":"2024-03-22T10:28:29","slug":"are-you-risking-a-pension-shortfall-by-overlooking-longevity","status":"publish","type":"post","link":"https:\/\/cliftonnash.co.uk\/are-you-risking-a-pension-shortfall-by-overlooking-longevity\/","title":{"rendered":"Are you risking a pension shortfall by overlooking longevity?"},"content":{"rendered":"\n

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A survey suggests that some retirees could risk running out of money during their lifetime because they haven\u2019t considered how long their assets need to last. Failing to factor longevity into your retirement plan could mean your later years don\u2019t live up to expectations or you may face financial insecurity.<\/p>\n\n\n\n

The report published in IFA Magazine<\/em><\/a> found a worrying 68% of Brits have not thought about how many years of retirement they need to fund.<\/p>\n\n\n\n

It\u2019s an oversight that could mean you don\u2019t put enough away for retirement during your working life and may not spot the potential gap until it\u2019s too late. Or that you unintentionally withdraw too much from your pension during the start of your retirement.<\/p>\n\n\n\n

The average person could spend two decades in retirement<\/strong><\/h3>\n\n\n\n

The survey found that most people expect to retire between the ages of 65 and 69. Data from the Office for National Statistics<\/a> (ONS) suggests the average person could spend at least two decades in retirement.<\/p>\n\n\n\n

A 65-year-old man has an average life expectancy of 85. For women of the same age, it\u2019s 87. As life expectancy has increased, younger generations are likely to spend even longer in retirement if they plan to stop working in their late 60s.<\/p>\n\n\n\n

However, creating a retirement plan based on the average life expectancy could still leave you facing a significant shortfall.<\/p>\n\n\n\n

A quarter of 65-year-old men are expected to celebrate their 92nd birthday, and 1 in 10 will reach 96. If they only planned for a 20-year retirement, they could find they don\u2019t have enough money to maintain their lifestyle in their later years.<\/p>\n\n\n\n

Similarly, a quarter of 65-year-old women are expected to live to 94, and 1 in 10 could reach 98.<\/p>\n\n\n\n

Retirees today often need to consider how they\u2019d cope financially if they live to become centenarians to create long-term financial security and peace of mind. With retirements that span decades becoming the norm, it\u2019s more important than ever that those nearing the milestone consider longevity.<\/p>\n\n\n\n

A retirement plan could help you create a sustainable income<\/strong><\/h3>\n\n\n\n

Understanding what income you can take sustainably from your pension or other assets in retirement can be difficult. After all, you don\u2019t know exactly how long you need to create an income for.<\/p>\n\n\n\n

Another key challenge is that your income needs might not stay the same throughout retirement.<\/p>\n\n\n\n

Indeed, inflation alone is likely to affect your outgoings even if your lifestyle remains the same. Even when inflation is stable, the rising cost of living may compound. The Bank of England\u2019s inflation calculator<\/a> shows how your income would need to grow to maintain your lifestyle.<\/p>\n\n\n\n

Between 2003 and 2023, inflation averaged 2.8% a year. That might seem relatively small, but it can have a huge effect on your essential and discretionary spending. If you retired in 2003 with an income of \u00a330,000, to simply maintain your spending power, it would need to have grown to more than \u00a352,000 a year in 2023.<\/p>\n\n\n\n

 There are other reasons why you might want to adjust your income in retirement too, such as:<\/p>\n\n\n\n