Living longer but falling short: Retirees risk outliving savings by underestimating life expectancy

Retirees are living longer than they ever expected – and their finances may not be keeping pace, according to research from Aviva and Age UK.

The report, Retirement Reality: Managing Money in Mid-Retirement, reveals nearly a third (30%) of retirees in their 70s have already outlived the age they expected to reach when they were in their 50s. Yet most (77%) still don’t believe they’ll live beyond 85.^[1]

 In reality, many will. One in four 70-year-old men are expected to reach 92, and one in ten could live to 96. For women the odds are even higher – 5% of 70-year-olds have a chance of reaching 100.^[2]

As financial decision making becomes more challenging with age, particularly due to cognitive decline, the report highlights how vital it is that people stay actively engaged with their retirement plans throughout later life – especially when it comes to managing pension withdrawals and considering later life annuities. Adopting a ‘set and forget’ approach isn’t going to be enough for a retirement that could last much longer than expected. The report calls for a shift in attitudes towards retirement planning and the introduction of simplified products like Aviva Guided Retirement, which blend solutions to offer greater flexibility in early retirement and a guaranteed income in the later years.

Emma Douglas, Wealth Policy Director at Aviva, said: “We don’t have a crystal ball to tell us how long we’re going to live – and our report findings highlight that today’s mid-retirees could be making important financial decisions based on incorrect assumptions about life expectancy. It can be tricky to get the balance right for a sustainable retirement income – living for now, while also saving enough for later life.

“A step in the right direction is to ensure you are fully informed. Having the right conversations with the right people, and at the right time, will help you to get ready for a retirement that might be much longer than planned.”

Aviva’s top tips for a financially fit retirement:

1. Think long-term. Your retirement could last 25-30 years, so plan for the long term and review those decisions regularly.  
2. Keep an eye on pension withdrawal levels. Reviewing your pension spending and savings is essential to meet your needs now and in the future. Overspending early could leave you short, but being too cautious could mean not enjoying retirement to the fullest.
3. Consider annuity options. Speaking to a financial adviser about annuities could provide added peace of mind and the guarantee of a regular income in later life. Try Aviva’s annuity calculator for an estimate of what your life long income could be.
4. Look into blended retirement solutions.  Flexibility early, security later to help your finances adapt to the different phases of your retirement.
5. Talk about your finances regularly and seek support. Building a retirement strategy isn’t a one-time task and will likely change with your evolving needs. Talking to friends and family about your wishes and plans for the future and seeking financial advice can help you stay on track to ensure your savings last for your lifetime.