How to prepare your finances so you can comfortably live to 100

The Office For National Statistics (ONS) life expectancy calculator is a useful tool for working out how long you could expect to live. For example, a 50-year-old woman today has a 25% chance of making it to 95, and a man of the same age has an equally high chance of living until 93.

Knowing how long you might live is important because your pension and any other savings need to support you throughout your life. The longer you live, the more money you’re likely to need.

Typically, retirement spending follows a “smile” shape:

With your life expectancy in mind and a general understanding of how you might spend money in retirement, you can begin to consider how much you might need to support a longer life.

At Amber River, we’re firm believers that life is supposed to be lived well, so it’s important to ensure you have enough in your retirement fund to thrive, not just survive.

For John Tinniswood, it was important for him to eat fish and chips every Friday. Fish and chips may not be your thing, but you’ll have other ideas for how you’d like to spend your 70s, 80s and beyond.

No matter what you want to do in later life, it’s important to look at your savings and investments, along with other income, to ensure you can afford the lifestyle you want over the long term.

Using cashflow modelling, our independent financial planners can forecast how much money you’ll need each year in retirement, based on your expected lifestyle and goals. You can then plan how your annual budget could change as you get older and your needs evolve.

This forecasting lets you look forward to retirement with confidence, safe in the knowledge that with ongoing planning, you’ll be able to live the life you want, even if you reach 100 or beyond.

When preparing for later life, you’re probably focused on building up a big enough pension pot. After all, this is the most tax-efficient way to save for retirement. However, the way you draw money from your pension when you retire is just as important, and it’s crucial to develop a strategy that will enable you to live the life you want long after you’ve stopped working.

Any defined benefit (known as “final salary”) pensions you have, plus your State Pension, are usually guaranteed payments made from a certain age until you die. These can form the bedrock of your retirement income. On the other hand, you have a lot of flexibility around accessing your defined contribution pension, which could include any workplace or private pension pots you’ve paid into over the years.

Since 2015, you can take your pension in a number of ways, including:

You can use one of these methods or combine them in many cases. It’s great to have freedom over how you access your pension savings, but there is a danger that withdrawing too much too soon could deplete your retirement fund. You can normally access your defined contribution pension from 55 – although this will increase to 57 in 2028 – so if you live to 100, your pension income will need to last for more than 40 years. Additionally, you may be liable to pay Income Tax on certain withdrawals.

With all of this in mind, it makes sense to consult with an independent financial planner. An Amber River IFA can help you design a pension decumulation strategy that is both tax-efficient and sustainable, to last you to 100.

John Tinniswood was born in Liverpool and spent much of his adult life there. He spent his final days in a care home in Southport, surrounded by family.

Going into care is a common experience for those in later life, and if you have to pay for your own care, it can be expensive. According to Age UK, it costs an average of £1,078 a week for a place in a nursing home. Depending on how long you need care, these fees can quickly add up. The government typically won’t provide support unless your capital is less than £23,250. Preparing for these costs now may help mitigate financial stress for you and your family if you ever need care.