Planning for a 100-year life
Chris Broome – Chartered Financial Planner
When you think about your lifestyle goals and financial plan, how far ahead do you look? It wasn’t so long ago that planning to reach 80 meant you could be sure of financial security throughout your life. But now, it’s becoming increasingly common to celebrate your 100th birthday, bringing new challenges to planning.
Just a century ago, 1% of babies born were expected to live to 100. As healthcare and a range of other factors improved, life expectancy has increased too. If you’re a female aged 60, there’s a 12.3% chance of turning 100, for 60-year-old men it’s 8.1%. If you’re 40 the chance of reaching 100 are even greater, at 18.7% and 13.3% for women and men respectively.
While improving health conditions are certainly positive, living longer lives means we need to change lifestyle too.
When you think about preparing to live longer, it may be money that springs to mind first. After all, a longer life means you’ll need to establish financial security that will last longer, probably with a longer time spent in retirement. But as with all financial plans, your goals and lifestyle should remain at the centre.
Previously, life was broadly split into three stages of education, working and retirement. We’re already seeing these stages change. It’s now far more common to find people transitioning into retirement, spending time on education in later years, or going back to work in some form after retiring.
You might be able to retire at 65, but would you want to spend 35 years in retirement? For some, this sounds ideal, but for others, it’s a long time not to work in some way, whether that’s through traditional employment or starting their own business.
Planning for a 100-year life should start with thinking about how you’d like your life to look.
- What are your goals at 60, 70 and beyond?
- When would you like to retire, and would you prefer to transition into retirement?
- What makes you fulfilled?
- What are your priorities now, do you expect them to change?
Of course, these lifestyle goals aren’t set in stone. In fact, regularly reviewing them and seeing if they still align with your aspirations and circumstances is important. But having an idea of what you’d like to achieve can provide direction and confidence.
Longer lives mean rethinking traditional lifestyle models, it’s a chance to think about what you want.
Managing your finances for 100 years
While goals and lifestyle aspirations are essential, we can’t ignore the fact that finance plays an important role in achieving this. Planning for a 100-year life presents new challenges.
It can be difficult to understand how personal wealth will change over a 10-year period as you need to factor in a range of areas, from investment performance to inflation. When looking at a 100-year life, you may be considering these factors over several decades, making it even harder to gauge how wealth can change and what’s sustainable.
This is where financial planning can help. Using a range of tools, we can help you bring together lifestyle aspirations with your current financial situation. It’s a step that can help you understand how your wealth will change depending on the decisions you make, whether that’s contributing more to your pension for a longer retirement or using a lump sum to tick something off your bucket list.
As we live longer, finances naturally need to stretch further and can become more complicated, and financial planning becomes even more important.
Planning for the next generation
As you consider life expectancy and financial planning, you may be considering what you’ll leave behind for loved ones.
Considering how our finances would hold up during a 100-year life is important for us all as it becomes more common. But it’s even more crucial when helping the next generation plan. One in three children born today will live to see their 100th birthday. It won’t become a rare milestone, but the norm. As a result, planning for a 100-year life needs to become the norm too.
You may be in a position to help children and grandchildren, whether it’s passing on knowledge or making regular pension contributions on behalf of a child. Small steps taken in the early years can help create a solid foundation that can be built-on, including learning positive money habits.
As you set out your own financial plan, this should include the inheritance you intend to leave behind. It can help you understand how loved ones will benefit and ensure the necessary steps are taken, such as writing a will or reducing Inheritance Tax liability. It’s a step that ensures your wishes are carried out and can help loved ones prepare for longer lives too.
As always, if you’d like to start a conversation about this article, please contact us.
A pension is a long term investment, the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Information is based on current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change.