{"id":963,"date":"2019-02-12T14:51:24","date_gmt":"2019-02-12T14:51:24","guid":{"rendered":"https:\/\/arkenstonewealth.co.uk\/?p=963"},"modified":"2019-02-12T14:51:24","modified_gmt":"2019-02-12T14:51:24","slug":"the-importance-of-longevity-when-planning-for-the-future","status":"publish","type":"post","link":"https:\/\/www.arkenstonewealth.co.uk\/blog\/the-importance-of-longevity-when-planning-for-the-future\/","title":{"rendered":"The importance of longevity when planning for the future"},"content":{"rendered":"

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When you\u2019re planning your financial future, you\u2019ve probably considered how much you need and how much you can afford to put away. But when you\u2019re planning your retirement, have you factored in longevity?<\/p>\n

At a time when retirees can access their retirement savings far more flexibly and in a way that suits them, longevity risk has become a reality for many. Considering your mortality isn\u2019t something to look forward to, it\u2019s something you need to include when taking steps to ensure your financial security in retirement.<\/p>\n

If you don\u2019t have an accurate estimate of how long you\u2019re likely to live, there\u2019s a risk that you\u2019ll run out of money in your later years. Imagine reaching retirement age and believing your retirement provisions need to support you for 25 years; what happens if you live for a further five, or even ten, years?<\/p>\n

Without an accurate picture of your longevity, it\u2019s challenging to ensure you\u2019re sustainably using your pension to create an income that will last for life. Even when you base your calculations on averages, the results can still be misleading. After all, a significant portion of people will outlive the national average.<\/p>\n

According to the Office of National Statistics<\/a>, a male aged 65 can expect to live on average a further 18.6 years, for women it\u2019s 20.9 years. Of course, your chances of reaching the average life expectancy and surpassing it depends on a whole host of factors, from your health to where you live.<\/p>\n

Why is longevity risk having an impact now?<\/strong><\/p>\n

While running out of money in retirement has always been a concern, there are several reasons why it\u2019s becoming a greater risk now.<\/p>\n

1. Life expectancy has increased<\/strong><\/p>\n

While life expectancy stalled in 2017, the increase over the last few decades has been significant. Even with the State Pension age rising, it means we\u2019re spending longer enjoying our retirement years. We now have to consider that our pension will need to support us for several decades.<\/p>\n

The UK is seeing record-breaking numbers of people celebrating their 100th<\/sup> birthday. With this in mind, it\u2019s not unfeasible that your retirement provisions will have to stretch for 40 years. If you\u2019re basing life expectancy projections on the retirement length your grandparents had, for example, you could outlive your estimate by some way.<\/p>\n

2. We often underestimate how long we\u2019ll live for<\/strong><\/p>\n

Linking to the above point, research shows many people underestimate how long they\u2019ll live for. It\u2019s a factor that can seriously hinder the ability to effectively plan your income during retirement. According to the Institute of Fiscal Studies<\/a>:<\/p>\n