When you are looking to the future, do you consider the possibility of living to 100 or further? 

This may seem unlikely and most don’t expect to live to the ripe old age of 100 but it may surprise you just how many are expected to receive a birthday card from the King.  

If you are interested, you can even find out your chances of becoming a centenarian according to the Office of National Statistics (ONS) as they have a very handy calculator which can tell you. Having looked for a 60 year old male and a 60 year old female the ONS predict a 3.7% and 6.4% chance of living to 100 respectively. That may sound small but that is 1 in 27 for men and just under 1 in 16 for women.  That’s better odds than picking the winner in the Grand National!  

So, should you expect to live to 100? Probably not, but should you entertain the possibility just in case? Definitely. 

What can you do when thinking about retirement to make sure your money has as much longevity as you do?  

The starting point is to understand your basic, discretionary and luxury expenditure. Simply put, if you don’t know what goes out, you can’t plan for what needs to come in.  

This of course is different for everyone, but basic expenditure is the bills you have to meet – food, electricity, Council Tax and so on. Discretionary may be the spending which you want but could cut back on, such as memberships and holidays, and luxury is just that, the spending that is the cherry on top, such as flight upgrades, second cars or whatever else is on your wish list.  

For your basic expenditure, you want to make sure this could keep you to 100 years old. A sensible consideration is to make sure this is covered by a guaranteed source of income or near guaranteed income, such as State Pension, Final Salary Pensions, property income and annuities. Why do you want this guaranteed? Simple, this is spending you can’t do without.  

Annuities 

Annuities have fallen a little out of fashion in the last ten years but with interest rates rising they have made a comeback. What is great about annuities is they don’t run out or at least they don’t run out until you do. So, for making sure you have guaranteed income, they are a fantastic way to allay fears of not having enough. Annuities can be set up with various options, they can have guarantees in the event of an early demise, they can rise in line with inflation, and they can have pensions paid to a spouse. A further upside to annuities and guaranteed income is that it can allow you to be more flexible with other assets in terms of spending or gifting.  

Often, retirement spending can be front loaded to those first ten years. Holidays tend to be a little more extravagant, adult children may be starting families or buying properties and parents want to help where they can and you finally have the freedom to pursue your interests that work and business had previously got in the way of.  

Flexible Access Drawdown 

Now annuities aren’t for everyone and since the introduction in 2015 of flexible access drawdown, it has been the more popular choice. So, if you want a more flexible choice to retirement, what are the important considerations around drawdown to understand? The biggest risk to drawdown is running out of money if you spend too much or have a poor investment strategy. We have a retirement investment philosophy that keeps a set amount of cash in your pension based on your spending plans, topping up strategically when it makes sense to, so when markets do what markets do and inevitably have a bumpy patch, you don’t have to worry about cashing in at the wrong time. This also allows our clients to take a long-term approach to investing with the pension funds they don’t plan to use in the short to medium term.  

What is key to clients in drawdown is to review, and review regularly. Have your circumstances changed? Has something out of your control changed, such as legislation? If you want to make sure your money lasts a lifetime, you want to make sure it is changing with you and adapting to any new circumstances such as the latest Autumn Budget or upcoming Spring Statement.  

So, at 60 should you be planning for a 40 year retirement? Probably not, but just in case you are the 1 in 16 or 1 in 27, you want to make sure you have the finances to make it and the knowledge of being able to enjoy whatever time you do have.  

If you would like to discuss your financial plans with one of our experts, please get in touch for an initial meeting without cost or obligation.   

Disclaimer  

Johnston Carmichael Wealth Limited is authorised and regulated by the Financial Conduct Authority. 

Please note: This communication should not be read as financial advice. While all possible care is taken in the completion of this  article, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm.