A recent study published in FTAdviser has revealed the perhaps surprising fact that the number of people reaching the age of 100 is expected to increase by 78% in the next 20 years.
In 2021, 16,000 people in the UK were 100 years old or more. That’s due to increase to 29,000 by 2041.
Some of the key reasons for this include:
- An increased understanding of diet and healthy eating
- Improved lifestyle choices
- Advances in medical technology.
Backing up the research, the UK Office for National Statistics (ONS) data suggests a baby born in 2022 has a 1 in 10 chance of living to age 100.
What does this mean for your money?
Living longer can raise issues when it comes to financial planning. Here are four key considerations when it comes to planning for the increasing possibility of living to 100 especially if you are an expat living outside your home country.
1. Living longer will have a significant impact on your plans– don’t outlive your money
Many people plan for their retirement on the presumption it will need to last for 20 to 30 years. The ONS life expectancy calculator supports this assumption confirming that, on average, a 55 year old male will live to 84 and a woman the same age will live to 87.
The age at which you decide to stop work will clearly have a big impact on your future finances. By working longer than you may have previously planned, if you are able to, you will have more time to grow your retirement funds. You will benefit from your money staying invested for longer and benefit from the compound growth effects.
It’s important to bear in mind that your specific plans for your retirement will have a key bearing on the size of fund you’ll need. Our clients that have received detailed retirement projections from us, will recognise this as we project and illustrate the impacts of inflation and drawing down income over a long period of time.
It is important to plan early, and, as you get closer to retirement to get into more detail, modifying and refining your retirement income planning.
A key part of your planning will involve ensuring you don’t run out of money in retirement.
How much income you’ll be able to draw from your pension funds and other assets, will clearly depend on the size of your wealth and your individual circumstances.
There’s no hard and fast rule for how much income you’ll need. Some key facts to bear in mind are:
As an expat, in which countries and currencies have you accrued pensions
Which country do you intend to retire in
The ongoing impact of inflation needs to be factored in so you don’t erode your purchasing power over time.
Calculating how much income you need in retirement is challenging. Working with an adviser using effective cashflow forecasting tools will create valuable insights when it comes to ensuring you stay on track, and that you can make necessary adjustments to your plans.
2. Optimising income flexibility can help your retirement planning
As an expat, you may well have pensions in different countries and you need to plan how you will manage this complexity to meet your income needs.
You need to plan for the different pension access and drawdown rules that apply in different countries. You pension accessibility can vary by more than ten years from one country to another. You need to factor this into your planning.
Beyond the age of access, different countries will have different rules and restrictions in how you can draw income and whether you have access to capital in your pension accounts. Some pensions will require you to buy an annuity which can give you guaranteed income for life- good news if you live to 100, but you also need to balance this against other more flexible income sources.
Including income generating assets from outside the pension system can give you the added flexibility your retirement planning may need. If you are an expat, it will be important to consider this in your planning.
3. You need a robust investment strategy
An effective investment strategy should be at the heart of your plans.
Having the right strategy in place will be crucial when it comes to planning for a long and rewarding retirement. This means focusing on the long term now and not being distracted by short term market movements and changing sentiment, with a strategy that adapts as you move closer to your retirement.
How you manage your investments will have to be specific to you and your needs. Your investment plan will depend on several factors:
- Your attitude to investment risk
- Other assets you may have to draw on
- Future financial commitments you may have, such as children’s education fees
- The period over which your money will be invested.
You’ll need a balanced plan that carefully weighs your investment strategy alongside your income needs and any lump sums you may need to draw from your fund.
4. Long-term care and where you live could be an issue as you get older
Living with illnesses that would previously have been terminal is clearly positive from a longevity point of view, but it does increase the likelihood of spending your later years in poor health.
Again, planning ahead is important, as is being aware of all the options open to you.
It’s likely that you’ll want to live independently for as long as possible. This could be facilitated by adapting your current property or downsizing to somewhere more manageable when you’re older.
The latter option could also free up capital to support your income. It could also provide the necessary finance to provide a domiciliary nursing care package to enable you to retain further independence.
As you get older, there’s an increasing possibility that you’ll need to move into residential care or a nursing home.
If you are an expat and you intend to live in another country in retirement you will need to factor in your access to care as you get older, your language and communication skills and the cost of this care, and weigh these up against the cost of moving to your country of citizenship for this more advanced care.
Get in touch
If you would like to talk to us about any of the issues you’ve read about in this article, please get in touch and we’ll be glad to help you. You can contact us at [email protected].