These days, thanks to a combination of healthy eating, regular exercise, and advances in modern medicine, the prospect of living until 100 is within grasp for more and more people.

Indeed, a study reported by FTAdviser suggests that the number of centenarians in the UK could reach 29,000 by 2041, a 78% increase from 16,000 in 2021.

While the thought of reaching the age of 100 is somewhat exciting for some – it’s not every day you get a letter from the monarch, after all – it’s essential to be prudent and think about how a longer life could affect your financial situation.

Continue reading to discover how, regardless of your expectations for the future, it’s wise to plan your finances for a 100-year life.

A longer life could mean you need to save more towards retirement

If, after a life of healthy eating and exercise, you do live longer, perhaps the most important thing to remember is that you’ll likely need more money to support yourself and your lifestyle well into your later years.

This means you’ll need to save more towards retirement while you’re still working, so the earlier you start considering a longer life, the better.

To show just how much longevity could affect your pension income needs, MoneyAge reveals the additional costs if your life expectancy rises from 84 to 100. These extra 16 years could cost you as much as £240,000 if you intend to live a “comfortable” retirement.

Even if you only plan to live on a “moderate” income in later life, you may still need an additional £112,000 in pension wealth.

Before you start thinking about how much you should realistically save for retirement, it’s worth considering the life you want to live when you stop working, giving you a rough idea of how much you need in your pot.

If you have grand plans and intend to go on a round-the-world holiday, or wish to purchase your dream home, you’ll likely need to budget more, especially if you’re living well into your 90s and beyond.

Alternatively, you could consider a “phased retirement”, slowly winding down while continuing to work part-time, in a consultancy capacity, or even starting your own business.

This could help you bolster your income in the early years of your retirement, while still enjoying the social and active side of remaining in work. Then, when you decide to put work behind you for good, the extra savings could last longer.

It’s vital to remember that your retirement income needs may well fluctuate throughout life

Another important consideration for a longer life and your finances is that your income needs in later life won’t be static, as you’ll likely need to draw varying amounts of money depending on the stage of your life.

For instance, when you first retire, you’ll likely have a list of activities and dreams you wish to accomplish, be it an expensive holiday, a new home, or simply helping your younger loved ones financially.

At this stage of retirement, you may need to draw more from your pensions and savings to support this exciting phase of your life.

Then, when you get slightly older, things could calm down, and you may become more sedentary as you enjoy some well-earned relaxation. This could mean that you spend less money as a result.

Finally, as you reach your golden years, you may need to pay more towards later-life care costs as your health declines.

In fact, data published by the King’s Fund reveals that, in 2021/2022, the price of residential and nursing care for retirees increased by 21% compared to 2015/16. This trend of rising care costs could continue as time progresses.

Due to these fluctuating retirement costs, it’s important to manage your income to allow you to live your desired lifestyle immediately after you stop working, while still ensuring you can afford costs in later life, such as long-term care.

One solution to this could be to mix any regular income with flexible pension withdrawals, as well as consider other invaluable sources of income, such as the State Pension, or money from buy-to-let properties.

It’s also vital to factor in the effects of external variables that could affect your retirement savings, such as investment performance and inflation.

Financial advice could help you pinpoint how much you need for the next phase of your life

As you can see, living longer likely means that you’ll need to save more for the next phase of your life while carefully overseeing your retirement income. This can be a bit of a balancing act, so it may be prudent to seek the help of a financial adviser.

We can use cashflow modelling software to calculate your predicted income, the amount you’ve already saved, and the rising cost of living. Then, we could use this information to accurately predict how much you’d likely need if you lived longer than expected.

Even if you don’t make it to 100, it could be wise to plan ahead anyway, as you could pass on any funds you don’t use to your next of kin. In this instance, we can ensure that you can set up this inheritance in a tax-efficient way.

We could also help you create an in-depth pension strategy that ensures your retirement fund will keep pace with inflation, allowing you to maintain your lifestyle regardless of how long you live.

Get in touch

If you’d rather focus on reaching a century to receive that coveted royal letter and don’t want your finances to consume your mind, then we can help.

Email or call 0113 262 1242 to find out more.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

The Financial Conduct Authority does not regulate cashflow planning.