The number of people reaching their 100th birthday is expected to treble over the next 25 years, raising a long-term financial planning challenge. How can savers ensure they have sufficient funds to maintain living standards through a potentially far longer retirement?

This problem was made significantly harder with the government announcement that it was cancelling planned reforms to long-term care funding in England, due to the cost.

Planning for the twilight years

This makes planning for the twilight years difficult. While people’s spending on essential bills remains fairly constant through retirement, discretionary spending, on travel and entertaining for example, is higher in the early years of retirement, but typically declines as people enter their 80s. However, it can rise steeply if care is needed, whether at home or in a residential setting. Building a decent retirement fund can provide flexibility through retirement, regardless of circumstances. It can help to save what you
can while working to build up funds. Starting early means your savings benefit from compound growth. Retiring later, or working part-time in retirement, can help these savings go further.

Seeking advice when it comes to retirement income options is imperative. Annuities offer a secure income and will continue to be paid for life, however long that is, but may represent poor value if you die young. Drawdown, where funds remain invested, offers more flexibility but less security. Many will opt for a blend of the two.

Consider all your assets

It can also help to take a holistic view of your finances. For many people it is unrealistic to save enough to cover day-to-day living expenses through retirement plus potential care costs. Other assets, such as a property, could be sold to pay for care should the need arise.