How long will my drawdown pension need to last

When I came across the Office for National Statistics latest life expectancy calculator http://visual.ons.gov.uk/what-are-your-chances-of-living-to-100/   I had a couple of thoughts after entering my age. The first was “25% chance of reaching 95, never” and secondly that “averages are always misleading”.

Knowing how long you require an income for is one of the great variables of financial planning. Of course, the simple truth is that we have absolutely no idea when our time is up, meaning trying to plan for our retirement can be a complicated business.

One client once summed it up with the comment “life would be easy if we all had sell-by dates”. Ummm, I’m not sure about that but it certainly would make me focus on my bucket list and what is important in life.  Guessing our “sell by date’ is aided by the ONS calculator because otherwise life may be enjoyed a little too much or worse still, not enough!

The sad fact is that many people’s method for calculating their own life expectancy is flawed. In my experience most people estimate their own life expectancy in one of two ways:

  • I’ll probably live to about the same age as my mother or father
  • I’ll probably live to the average age

The truth is that both these methods of calculation are often flawed. Medical advances are improving every year and so there is a strong chance that you will now survive whatever illness led to the death of your parents. The averages are also skewed by location and lifestyle factors. As a IFA based in London and Surrey my clients may well live longer than the average due to what is often referred to as the ‘postcode lottery’.

A 2015 modelling study looking at trends in life expectancy in the UK estimated that male babies born in 2030 could live to an average of 85.7 years, with females living an average of 87.6 years. Compare this to the average life expectancy of someone born in 1930 – 58.7 years for men and 62.9 years for women – and you can see that there is a strong chance you’ll live a lot longer than your parents.

Similarly, estimating that you will live to the average age is also flawed. Life expectancy numbers that you hear or read in the news are, as mentioned above, life expectancy at birth.

But someone doing a retirement planning calculation has already survived the problems of infant mortality, childhood diseases, teenage driving accidents, and other random causes of death. So if life expectancy at birth is in the high 70s, by the time you’re 60 or 65 your life expectancy is well into the 80s, depending on gender, general health and personal habits.

The main value of these calculators is to clarify a simple fact: you might live a lot longer than you think you will.

There is the key point here: the chances are that you will live longer than you anticipate and you should therefore plan your retirement accordingly. That means making sure your pension drawdown lasts longer than you estimate or at least having a plan B if you live longer than you expect.

We are experienced At Retirement Financial Planners based in Epsom, Surrey. To have a chat or book a free consultation – please get in touch by clicking here

Reviews and Ratings for Financial adviser Ray Martin, Kingston-upon-Thames

We’re highly rated

We retain a 5-star rating on VouchedFor, an independent service that enables clients to review their professional advisers. The reviews and testimonials we receive are verified by VouchedFor, so you can be confident that they are authentic.

Read More

Our former financial adviser was retiring and recommended Ray to us. He alleviated the constant worry of where to best invest our savings without too much risk. We’re very pleased with the results over the last 10 years. He explains things in layman's language, which we appreciate, and gives us the confidence we have made the right choices. What more can people expect?

Kathleen

We had pension policies and investments that needed sorting out ready for retirement. We didn't know what to expect from a financial adviser. We assumed that he would simply advise us where to get the best deals. How wrong we were. Ray took us right back to basics. He made us carefully consider what we really wanted to achieve. He has allowed us to start to really enjoy our retirement.

Michael

I needed financial advice about pensions and investments as I approached retirement. My wife was in the same position. Ray Martin worked out a comprehensive plan for putting my pension provision and savings into proper order. He did the same for my wife. He has continued to provide us with advice ever since. Ray is always straightforward, open and proactive.

Laurence

I was approaching retirement and wanting to look into limiting taxation and Inheritance Tax, as well as providing for my wife. Ray provided sound advice to switch from my current arrangement to a Drawdown Pension and ISA investments. I have now retired and have started seeing the benefits of his advice. The returns on my portfolio have increased beyond expectation. Ray performed extremely well.

Demetri

I had sold my house and didn't know how to invest the money. Ray invested very wisely and there has been about a 5% increase every year. He listened to our queries, gave answers that we fully understood and followed any requests. He always had time for us, and never rushed us. We would have been financially at a loss without his help.

Brian

Ray has been advising my wife and me for about 20 years. He is everything one could hope for in a financial adviser: wonderfully enthusiastic, extremely well informed, completely trustworthy and scrupulously observant of the regulatory requirements. He is able to explain complex matters very clearly, and so far, his advice has always been first class.

Oliver

I had money to invest and had no idea how to go about investing it and hopefully making a gain. I have three children and wanted advice about inheritance planning. Ray is very patient, very clear when he explains things, he is very interested in me as a person, totally trustworthy and is an excellent listener. We have never been disappointed! He`s been brilliant.

Rosie

I had just been widowed. Ray sorted out and simplified what was a very complex set of investments into a much less confusing portfolio. I have been extremely happy with everything Ray has advised over the last 12 years. Whilst moving with the times, he has dealt with all aspects of my investments wisely and given me all the guidance and help I have needed.

Pat

As the financial director of a company, I was seeking to get advice on how to plan and invest for retirement. Without a doubt, Ray Martin helped me understand and plan how to fund my retirement. Ray has been with me every step of the way. His advice has been invaluable. I retired and achieved my annual income goal. His continued advice is helping me in the next stage of my life.

Mike

I needed some advice regarding my late mother’s estate. I had also retired and required advice on how to manage my private pension. Ray was extremely helpful, and his advice was very clear and easy to understand. I came away from our initial meeting feeling very relieved and less stressed. We have just had our first yearly review and I was surprised how well my investments had done.

Jane

In the last 10 years, my circumstances have changed with the passage of time. Ray has guided me on how to protect and make my money grow. He listens carefully to my needs and gives clear, concise advice in a professional manner. He and his team are always accessible and patient with my questions and their approach gives me confidence that my finances are securely looked after.

Glenys

Client stories

Mike

Planning for retirement

An accountant by trade, Mike knew the value of seeking the help of a financial professional when it came to planning for his eventual retirement. Here’s his story.

Read More

Oliver & Rosie

Peace of mind in retirement

Oliver and Rosie have found the financial peace of mind they needed to enjoy retirement to the full. Here’s their story.

Read More