In today’s rapidly changing world, the increasing number of people living beyond the age of 100 has profound implications for financial planning.
Here we look at some of these implications and the ways in which our advice is helping clients.
The Rise of Centenarians
Centenarians, individuals who reach the age of 100, were once considered rare exceptions. According to official data from the ONS the number of people living to over 100 in England and Wales has doubled in a decade. The most recent figures from 2022 show that the number of centenarians was 15,120.
Of those living to 100 and beyond, the number of women continues to far exceed the number of men. However, the ratio of 100+ women to men has significantly fallen, now 4.5 women to every man, meaning a 100-year life is a real prospect for both men and women.
Whilst reaching a grand old age is something many of us may aspire to, and indeed doing so should rightly be celebrated, there are many implications; not all of which will be easy to navigate.
Financially, increasing longevity presents both opportunities and challenges for financial planning. On the one hand, people living longer and healthier into the traditional ‘retirement age’ have more time to accumulate savings and investments, which can provide financial security throughout their retirement. This will often involve individuals working well beyond age 65, however.
Other unique financial challenges associated with longer life are significantly longer retirement periods, medical expenses, and the potential for cognitive decline.
Longer Retirement Periods
One of the primary financial implications of living longer is the need to fund an extended retirement period. With individuals living well into their 80s, 90s, and beyond, a retirement fund may feasibly need to last 35 years or more. This longer retirement period requires careful planning to ensure clients have enough money to meet their living expenses and maintain their desired lifestyle.
When working with clients with no health concerns, our standard cash flow models are now based on clients living to age 100. This allows us to help clients develop a conservative and sustainable retirement strategy and plans for the possibility of a longer lifespan.
Another significant concern among centenarians is medical expenses. As people age, the likelihood of developing chronic conditions and needing long-term care increases. The cost of healthcare, particularly long-term care, can be substantial. We can help clients prepare for these expenses by reviewing insurance coverage, considering long-term care options, and exploring ways to fund medical expenses through savings or insurance.
Cognitive Decline and Estate Planning
Living to 100 also brings unique challenges related to cognitive decline. As people age, they may experience changes in cognitive function, making it difficult to manage their finances or make sound decisions. It is important for financial advisers to incorporate strategies to protect clients’ assets and prevent elder abuse.
Estate planning, including making provisions for a Lasting Powers of Attorney, is becoming even more crucial as centenarians face the possibility of not being able to manage their finances independently.
The rise of people living to 100 has significant implications for financial planning. Clients should consider the implications that a longer life may have on them and their families – obtaining personalised advice from a financial adviser. Working alongside a financial adviser can help clients navigate the complexities of a longer lifespan and ensure they have a secure and fulfilling retirement.