The chances of living to be over a hundred years old are going up, as figures from the ONS show that there were a record number of 14,570 centenarians in 2015, an increase of 65% over the last decade.
Not only that, but 850 of the centenarians were even 105 years or older, which means they've been retired for at least 40 years. Imagine that! With it becoming increasingly common for people to reach these old ages, it's more important than ever to think of saving up enough for retirement.
Given the recent increase in people taking payments out of their pension pots early through the new pension freedoms, Alistair McQueen, savings and retirement manager at Aviva, has called for caution: "Aviva welcomes the new pension freedoms [and a] record number of centenarians is a cause for celebration. However, it also increases the need for us to plan for and carefully manage our retirement."
To help give people a better idea of how much they need to have in their pot, Aviva ran a survey to see how good people are at guessing their life expectancy. They found that women were better at guessing this than men, only underestimating the figure by 23 months, compared with the men's deviation of 42 months. This may seem relatively unimportant, but if people take money out of their pension with the wrong life expectancy in mind, this could cause quite some trouble later down the line, when they tend to need it the most.
It is common knowledge that women live longer than men, with ONS statistics from 2015 showing that life expectancy at birth is 82.8 years for females compared with 79.1 years for males. Similarly, 85% of centenarians in 2015 were female, as were 88% of those aged 105 and over. This suggests that women have more to worry about in terms of retirement savings than men.
However, the ratio between male and female life expectancies is falling, due to improvements in the life expectancies of men. The ratio of 100-year-old women per 100 men was down from 284 in 2005 to 220 in 2015. This means that men are by no means off the hook when it comes to saving for their future.
With savings rates at record lows, some are calling on people to look beyond cash and consider investing in the higher-risk, higher-reward stock market instead. For plenty of people, however, the main challenge remains being able to save anything at all.
Gareth Shaw, head of consumer affairs at Saga Investment Services, commented on the ONS' figures: "If this trend continues as it has over the past years, people will be looking at having to fund a 40-year period with their pension and savings. For younger generations, with less generous pension deals and lower levels of pension contributions, this is going to be all the more difficult.
"Today's retirees routinely underestimate how much they need to have a decent income in retirement. Research from Saga Investment Services found that over 50s need double the amount they think to generate the kind of income that will leave them comfortably off in their later years. And this doesn't even factor in the high cost of care in later life. For people approaching retirement now, it is vital that they consider how to maximise their money."
To get a better idea of where you stand in terms of retirement savings, consider a pension consultation with a professional financial adviser to find out how much you need to pay into your pension every month in order to have a comfortable, long later life.
If you aren't sure what the best way to save for later life is, remember that you should only invest in a stocks and shares ISA if you are happy with the risk. Otherwise, a cash ISA can still give you a decent return if you find the right one. Don't neglect your workplace pension, either.
All in all, there are many ways to save, just make sure you are doing enough so you can become a financially healthy and happy centenarian.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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