What should you think about when planning for a longer life?

Closeup of an older gentleman's hands resting atop one another

Thanks to modern world medicine and advanced healthcare, and a greater understanding of what the human body wants and needs, we are living longer lives.

According to the Office for National Statistics (ONS), the average UK life expectancy at birth between 2018 and 2020 was 79 for men and 83 for women.

On average, that means that men are living eight years longer and women six years longer than in 1980 to 1982.

But what considerations are there when planning for a longer life, and what can you do to prepare? Read on to find the answers to these questions.

There are several general financial concerns when approaching later life

In simple terms, if you’re likely to live for longer than previous generations then your retirement fund will have to last you for longer. If you retire at age 60, your fund may have to last 20, 30 or even 40 years.

According to the ONS, the number of people over the age of 65 is increasing rapidly. The official data states that:

  • Half of males can expect to live to 82.4 years
  • Half of females can expect to survive to 85.8.

Furthermore, the most recent data shows that UK life expectancy at age 90 years was 4 years for males and 4.6 years for females.

What this all means is that you have to plan carefully to avoid running out of money in later life.

The first thing to consider is that your spending patterns are likely to change as you get older. In the early years of your retirement, you may spend money on travel, hobbies and all the things you had looked forward to during your working life.

As you get older, you may spend more on things like later-life care – and this is a key area where planning is essential.

One of the biggest considerations is care costs, and many people fail to think about it

Care costs can be remarkably expensive, and a lot of people disregard them as they approach retirement and beyond. While the cost of care varies dramatically depending on what you require, it can never hurt to prepare for the worst.

The Conversation has found that 1 in 7 older people could incur total care costs of more than £100,000. Costs this high are difficult to plan for, but it may end up being a necessity.

On the other hand, they also estimate that nearly a quarter of older people might avoid the need for care altogether. This is great news, but it does complicate things even further, making later life even harder to plan for since you never really know how much you might need.

Any care costs you do end up paying could eat into money that you had set aside for your family, whether intended as gifts or to be left as a legacy. If your care reaches levels that you hadn’t anticipated, you could deplete your savings faster than you expected.

The earlier you can begin preparations, the better

There are a few things you can do to prepare for the costs of later life, and the earlier you start, the better.

One such example is to increase your pension contributions while you’re still working. Your pension fund benefits from compound returns, meaning that any returns you gain can also generate returns. This means that the longer you let it grow, the better.

Contributing toward your pension is also a tax-efficient method of saving since you can benefit from tax relief. Basic-rate taxpayers benefit from 20% tax relief, meaning that a pension contribution of £100 only costs you £80, as the remaining £20 is topped up by the government.

Another way to prepare for later life is to maximise the amount you save. Using tax-efficient products such as ISAs can help you to generate a significant lump sum you can access in later life.

It can also pay to think about clearing your debts before you retire. Repaying your mortgage before you retire can give you the security that you own your home and remove one of your major monthly outgoings.

If you want to repay your mortgage before you retire, get in touch. We can help you find the right strategy for ensuring you repay your home loan as quickly as you need to.

A financial planner can be there to help navigate tough situations

Lastly, it is always worth contacting a financial planner when organising your finances, no matter what stage of life you are at. We can help you to better understand your financial situation and any options you may have available to boost your retirement fund.

We can help give measured advice that takes into consideration your wealth and personal situation and help build a plan to get the most out of your money. If you want to find out more about how we could help you and your finances, email enquire@london-money.co.uk or call us at 0207 808 4120.