Preparing for a Century: Financial Considerations for Living to 100

As human lifespans extend further, it’s crucial to address the financial implications this longevity brings. This article explores the challenges ahead and provides actionable steps to ensure a financially secure life as we consider the prospect of living to 100 years of age.

Expanding Lifespans

The UK boasts some of the world’s lengthiest average life expectancies, averaging 81.2 years. Yet, within this statistic lie substantial disparities influenced by gender, region, socio-economic factors, and more. While those living in Kensington and Chelsea live an average of 83.3 years, those in Blackpool average just 74.7 years.

Beyond mere averages, the number of individuals reaching their 90s and even hitting the remarkable milestone of 100 has notably risen. Over the past century, the number of centenarians living in England and Wales has increased 127-fold, reaching 13,924 in 2021 and this trend may be accelerating. The number has nearly doubled in the past decade, indicating a shifting landscape where celebrating a 100th birthday becomes increasingly common.

Projections from the Office for National Statistics (ONS) suggest that around 1 in 3 children born today will reach this centennial mark. With this surge in longevity, society braces for a significant increase in older individuals and a substantial rise in centenarians in the years ahead.

Financial Implications

While longer, healthier lives are cause for celebration – owing primarily to advancements in medicine, lifestyle improvements, and safer working conditions – these extended lifespans can put a significant strain on financial resources.

The burden on finances peaks during youth (education, healthcare) and in old age (medical care, long-term support). As the older population grows, it poses substantial financial pressure both personally and on a national scale. Welfare systems and healthcare, including the State Pension, face heightened strain, potentially leading to reduced support and increased individual contributions.

Moreover, the cost of prolonged old age, including expensive medications, therapies, long-term care, and funeral expenses, escalates. This reality necessitates a more stringent approach to financial planning for a sustained and comfortable retirement.

Preparing Financially for the Longevity Shift

Commencing early with financial planning is pivotal. Investing in pensions, ISAs, or other investment products becomes essential. Consider the financial timeline: a potential retirement period of 30 years during a 45-year working span demands substantial savings for a secure later life.

Determining the “how much” and “how” of savings constitutes the cornerstone of a robust financial strategy. Estimating required funds involves considering lifestyle expectations, investment returns, and inflation rates.

Navigating Inflation and Longevity

Inflation is a critical factor often overlooked in long-term financial planning. As prices escalate, the value of savings diminishes over time. Accounting for inflation through meticulous financial planning is vital to ensure future finances meet anticipated needs adequately. It’s also important that the bulk of any money put aside for retirement is ‘invested’ rather than ‘saved’. It’s crucial to generate a real return (ie. a return in excess of the rate of inflation). Over a long investment period, the power of compounding returns can be one of the most important factors in successful financial planning.

Key Steps to Plan for a Century of Life

So what are the most important steps to plan for living to 100?

• Get a financial plan. Try to map out when you plan to retire, the income you may need in retirement to sustain your lifestyle and what this means in terms of putting money away for your older age.
• Put away money as early as you can. You may be retired for several decades so it’s important to start putting money away for your older age as early as you can to benefit from the power of compound returns.
• Invest rather than save. Investing the bulk of your money rather than saving it in cash will give you the best chance to achieve real long-term returns and grow the value of your money. This will be crucial to fund a long life.
• Consider the cost of long-term care. More and more people will require long-term care and this doesn’t come cheap. Build anticipated care costs into your financial plan.
• Maximise the tax benefits available. Products like pensions (where contributions receive a boost through tax relief) and ISAs (on which no tax is payable) are great ways to put money away for your latter years and fund a long retirement.
• Manage your spending in retirement. Follow your financial plan and try to create a budget for your spending. Review your finances regularly to ensure you remain on-track. This will allow you to plan with a degree of certainty and help ensure you never run out of money.

By following these steps, you will give yourself the best chance to live a prosperous and fulfilling life, even into your second century on the planet.

Affording a Century of Life

With a well-crafted financial plan and a commitment to consistent saving and investing, the prospect of reaching 100 and thriving financially becomes attainable for everyone. Early planning, adherence to a structured financial strategy, regular reviews, and contemplation of the needs of later life are key components to achieving this goal.

As society hurtles towards an era where living to 100 becomes commonplace, it’s imperative to approach this future with serious consideration. Ensuring financial security allows us to embrace our 100th birthday as a celebration and enables the possibility of leading fulfilling lives well into our second century on Earth.

If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.

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