5 simple ways to maintain your financial resilience during a long retirement

Published on August 16, 2023 by Andrew
A couple on a sofa looking into an empty wallet

According to the latest figures from the Office for National Statistics (ONS), the average UK life expectancy for those born between 2018 and 2020 is 79 years for males and almost 83 years for females.

For those already 65 between 2018 and 2020, life expectancy is 18.5 years for males and 21 years for females (or 83.5 and 86 years old, respectively).

The UK State Pension Age is currently 66, increasing to 67 by 6 March 2028. This means you could be receiving the State Pension for two decades. But you could be retired for even longer.

The current minimum retirement age in the UK is 55 (rising to aged 57 in 2028). If you retire at 55, you can expect to be receiving a pension for 30 years or more. 

Factoring this longevity into your retirement planning is crucial to maintaining financial resilience into later life. It won’t be easy but at The Pension Planner, we’re on hand to help.

Here are five factors to consider.

1. Maintain an emergency fund to cover unexpected shocks

It’s important to maintain a cash safety net, even in retirement.

Try to hold between three to six months of household expenditure in an easy access cash account. This ensures it will be quickly available in an emergency.

You might have regular income from an annuity or the flexibility of drawdown, but taking money from your pension could upset your budgeting. If you have pension income from elsewhere, from buy-to-let properties, for example, this might make a great safety net.

Just be sure not to hold too much in cash. 

With inflation still high, savings rates are on the up but not quickly enough. The money you hold in cash is still likely to be losing value in real terms so hold only what you need to cover an emergency.

Funds exceeding three to six months’ worth of expenditure might be better off held elsewhere.

2. Consider a mixture of guaranteed income and flexibility

It can be easy to think of your retirement options as a binary choice: the traditional pension annuity or the flexibility of Pension Freedoms.

But this doesn’t have to be the case. In fact, a combination of both is likely to make the most sense for many.

Consider using the guaranteed, stable income of an annuity to cover fixed, known expenses like a mortgage or household bills. This will give you peace of mind that these are covered.

You can then afford to use flexible options like flexi-access drawdown or lump sums to cover one-off luxuries like holidays.

Having regular income alongside readily available cash is a great way to maintain financial resilience in retirement. 

3. Budget carefully and be aware of external factors like the economy

As we’ve already seen, you might be in the pension decumulation stage for three decades or more so you’ll need to think carefully. 

Thankfully, we’ve done much of the hard work for you in our blog, Revealed: Why pension decumulation matters, so get in touch if you have any questions.

4. Put plans in place to protect your loved ones

If you opt for a traditional guaranteed income for life, consider a joint-life annuity. This will continue to pay in the event of your death, ensuring that your partner receives a regular income. 

You might also choose a guaranteed period (usually 5 or 10 years), which means your pension will continue to pay for that amount of time, even if you die within that period.

Both of these options make your annuity more expensive, so the regular amount you receive will be lower. But you’ll have the peace of mind that your loved ones are protected.

5. Plan for the potential costs of later-life care

This is Money recently confirmed that the average cost of a care home is around £46,000 a year. And this doesn’t include nursing fees which could amount to an additional 20%.

Even if you don’t need to move into a care home, the cost of at-home care could be huge.

We can help you to incorporate the potential costs of later-life care into your retirement planning. Not only that, but we’ll also include contingencies in case care isn’t needed.

While life expectancies are rising, so too is the likelihood of spending time in social care. Building that protection into your plans now is vital, so get in touch.

Get in touch

With longer life spans come longer retirements and that makes maintaining your financial resilience crucial. Whatever aspect of your long-term retirement plans you need help with, get in touch. Email info@thepensionplanner.co.uk or call 0800 0787 182. 

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. 

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