How will a longer life span impact your finances?

You may have seen recent articles in the news highlighting an update around studies on the human life expectancy and how it compares with how long people think they will live.

A recent survey by Horizon Research showed that only 18% of people think they'll live to be 91 years old. But, interestingly, about 42% of women actually reach or go beyond 91. For men, it's around 30%. So, there's a difference between what people expect and what often happens when it comes to average life expectancy.

The upshot is that, overall, we are living longer, and each generation is lasting longer than the previous one. Depending on your view this can be a reason to rejoice, however it does raise the question of whether we will outlive our financial resources or not.

My thoughts on the possible implications are...

Many people will have to work longer, save more or both.

The idea of working longer as we get older doesn't have to be seen as a bad thing. Evidence shows that staying active in work, being productive, and enjoying the social aspects of a job are great for our well-being, especially for those who find fulfilment in their work.

With the increasing popularity of working from home and flexible hours, the possibility of continuing to work as we age becomes more realistic and less challenging. This flexibility can have positive effects on our overall health and happiness.

However, it's important to recognise that this may not be as simple for those in physically demanding jobs. For those in this position, it's recommended to focus on saving money and exploring less physically demanding career options as you get older. Planning for a transition to a less physically demanding job can be a smart move, ensuring more financial security and the ability to maintain a satisfying lifestyle and good quality of life as you age.

Women are often overlooked in the financial planning world.  

Women typically live longer than men. This means that, on average, women often end up with more financial responsibility as they outlive their partners. Despite the belief that men usually handle money matters in relationships, studies suggest that women can be better at investing.

It's important for the financial industry to encourage more women to get involved in managing money. Since women live longer, there should be ongoing efforts to focus on their financial well-being. The longevity issue certainly highlights the importance of continued growth in focus on women and their financial future.

Investors need to understand and define their time horizons.  

When you start your retirement planning, the big challenge is not knowing how long you'll live and how long your retirement savings and investments need to last. While your human capital (earning power) in most cases will reduce in retirement and older age, your spending, which includes covering the cost of living, still needs to keep up with rising prices (inflation) to maintain your financial security. Therefore, your retirement savings and investments have to keep growing to support yourself for possibly a longer time than you expected.

It's essential to take proactive steps now to secure a better retirement plan for the future as it affects how much risk you can take with your money and how you spend it now and in the future. Plus, it impacts how much money you can safely take out of your investment portfolio to cover your current expenses. So, taking action and planning ahead is really important to make sure your money lasts as long as you do.

How we can help

We at Collinson Wealth Partners would be happy to share our knowledge and experience in this area, explore the above considerations with you, and help you produce a plan to ensure security and peace of mind into your retirement.

The information contained in this publication is general in nature and is not intended to be personalised financial advice. Before making any financial decisions, you should consult a professional financial adviser.

Collinson Wealth Partners FSP 743091 believes the information in this publication is correct, and it has reasonable grounds for any opinion or recommendation contained in this publication on the date of this publication.