The ‘100-year life’: My plan for a ‘37-year’ retirement

One of the gloomier activities I have been inflicting on friends and colleagues this week, amid conversations about rising retirement ages, is to encourage them to look up their ‘death day’.

This is a gift from the Office for National Statistics (ONS) in the form of a calculator on their website. Based on gender and age, it will reveal the average lifespan to expect.

For me, at 50, I have 34 years left, as an average. Expressed this way, it feels morbid and a little depressing. It need not be. The Stoics and other philosophers would argue that staring at your own mortality is life affirming; a reminder to get on and enjoy it.

I do find it motivating to equate what’s left in numbers: in my remaining 34 years I might expect 20 big holidays, maybe 25 theatre nights, perhaps 80 more novels, if I can read a little faster, and three more end-of-decade celebrations.

My real passion is swimming in cold lakes and rivers, with a 13km Thames swim booked for August. Given the rising number of injuries, the list of future big swims may be curtailed anyway. Such number-crunching prompts pause for thought.

On a more practical level, I’m beginning to focus more clearly on the detail of how I will fund retirement and, in the knowledge that it’s most likely to last 17 years from age 67, my official State Pension age.

I must also prepare for scenarios that see me lasting until 93 (a one in four chance), or 97 (a one-in-10 probability), the ONS calculator suggests.

The long-term trends of rising longevity have been with us for a while, with the cost of funding such long lives an increasing concern for state and individuals alike. The ONS calculator told a 25-year-old colleague she would likely live to 89, with a one in 10 chance of making it to 101. For her and millions of other young people, it will require not just careful retirement forethought and planning but perhaps a more radical shift in mindset.

There is a growing debate around ‘the 100-year life’ following the publication of a book of that name in 2016. The notion of the three-stage life - education, work, retirement - may begin to morph into something else. Perhaps a life where longer lifetimes are funded by longer careers but where we work in a different way - more part-time work, more work that looks like our hobbies and interests, more entrepreneurialism, and so on. The explosion of ‘digital nomads’ - those who log in to work from home while travelling the world - is one example. An estimated 16,000¹ such nomads work in Lisbon today, according to Nomad List.

It may take decades for working patterns to fully evolve to the 100-year life. But Britain is likely to be a leader - it ranks seventh globally for the proportions of centenarians ahead of the likes of Greece and Italy, famed for their life-extending Mediterranean diets.

Some of the solutions outlined for younger generations may also work for those closer to retirement, and perhaps already are. Consider the increase in consultancy work, where employees stay on earning less but delay the day when they to start to diminish their retirement fund.

On a more prosaic level, my fellow 50-year-olds must tackle the great number unknowns: how long you will live, which feeds into how much money you will need, which feeds into how much you need to save.

How long will you live?

When looking at the data, there’s a few things to consider. The ONS life expectancy tool calculates that the longer we’ve already lived for, the longer we will live. So, a 65-year-old man can expect to live to 85; a 90-year-old man is expected to make it to 94. For this reason, my life expectancy of 84 will be higher when I reach mid-60s.

It’s also worth noting that while life expectancy gains have been extraordinary in recent decades the improvements may be slowing. Covid had an impact and the growing obesity epidemic will continue to have a greater influence. It is incredibly difficult for a 25-year-old to calculate how long they might live and how long they may need to fund a retirement.

What age will you retire?

Warnings of later retirement dates keep coming. Most recently, the International Longevity Centre caused unease by suggesting the State Pension age would need to rise from 66 today to 70 or 71 by 2050².

The reality is less bleak. Under current rules, the State Pension age will rise to 67 between 2026 and 2028 and to 68 by 2042-44. The age at which you can access your own pension funds will also rise, up from 55 to 57 in 2028 and will then probably follow the State Pension age changes minus 10 years. It would in theory rise to 58 in 2034.

To keep the State Pension affordable, the government may accelerate rises in pension ages. The alternative is to loosen the ‘triple lock’ commitment that sees the State Pension increase by the faster of wages and inflation with a minimum rise of 2.5% guaranteed. This may become more palatable once the gap between working incomes and retirement incomes has closed further.

I’ve noticed that people in their 20s and 30s often dismiss the State Pension’s future, believing it will be worthless or entirely absent when they come to retire. I wondered the same at their age. Today I’m more positive. Providing support in retirement is a fundamental tenet of the social contract and the improvements to it over the past decade reflect this. The State Pension will stay and already today it is meaningful. For many, the full State Pension of £10,600 a year is all they have; for nearly everyone else it makes a substantial contribution to their retirement planning.

How much will you need for a decent retirement?

New estimates of retirement were published by the Pensions and Lifetime Savings Association (PLSA) earlier this month. Individuals seeking a comfortable retirement should now expect to spend £43,100 a year, up by 15.5%³.

At Fidelity, we recently ran some calculations based on retiring at age 65 with the aim of delivering income of £43,482 a year, escalating with inflation.

The individual would receive the current full State Pension from age 67, £10,600 a year today, reducing the income they need from investments to £32,882.

A woman would need to accumulate £640,000; a man would need less, £600,000, due to their shorter life expectancy. This is based on the income rising with inflation at 2% and assumes investment growth of 5% gross with 1% fees and with no plan to pass on an inheritance.

Life expectancy is assumed to be 20 years for a man and 22 years for a woman. But if the man lived to 92 rather than 85 they would need to save £750,000 - an additional £150,000.

Variables in investment returns can also warp the maths. If annual returns were as poor as 2%, the man would need £810,000. If markets were kind and he notched up 8% gains he would need only £460,000.

Finally, we can’t forget inflation. If the Consumer Prices Index, or CPI, settled over the very long-term at 4%, the sum needed would leap to £803,000.

My retirement

Certainty is rarely a feature of modern retirement planning. I am part of a generation that must deal in theoretical scenarios, such as the one above, as the guarantees of final salary pensions become ever rarer.

The only certainty is that I must save more to increase the chances of the retirement I want. I’ll continue to save into my company pension scheme, the most tax efficient savings option for most people, and keep bringing together old work pensions better visibility should mean better planning.

I’m also growing more accepting that I will work until my retirement age of 67. But I would also like to know I could step back from work earlier if I needed to.

Healthy lifetimes, after all, are not increasing as they once did. The stats tell me there’s a growing chance I’ll hit ill-health in my 60s. I hope not but I would like to know I could retire or part-retire at 60 if needed - maybe because of ill health, or just because I’ve lost my work joie de vivre. In that instance, I would need to fund a 24-year retirement, if you go on the averages, but should have a plan for the one-in-10 chance that it will be 37 years.

Until then, I’ll keep checking I’m on track. I’ll ensure every holiday counts and that my remaining 25 plays, 80 novels and many big swims are all crackers. That’s the fun part.

¹Nomad list
²International longevity centre
³Pensions and Lifetime Savings Association (PLSA