We are often reminded that – in the words of a former UK prime minister, Benjamin Disraeli – “Change is inevitable. Change is constant”. This has certainly been the case with regard to later life planning. Then add into the equation the increasing amount of time that we’re spending (money) in retirement, and substantial changes in our expectations for life as a retiree. Meanwhile, governments around the world are regularly reviewing the needs of their populations in retirement. Here, we highlight three changes that we think those coming up to retirement need to be aware of:

1. Longevity

We all question how long we will live for, and a lot of factors affect the outcome. These can be known (such as your ancestry and lifestyle) or beyond your control and foresight (such as medical developments). Meanwhile, as many of us underestimate how long we will live for, the situation becomes even more complex because we are planning for an undetermined timeline with a finite sum of money.

Given the number of unknowns, we believe it’s best to plan to the age of 100. Yes, this is above the current averages for life expectancy levels, but centenarians are a steadily growing demographic group.

Using the UK as an example, it is estimated there are currently 92,000 people aged 100 or older in the UK, up 44% since 2000. However, by 2041, the number of people in this group is expected to have grown by 78%. This is a particularly important consideration for women, who currently make up 80% of UK centenarians, and who may outlive their spouses by many years.

These are just some of the facts and statistics to be taken into account. In addition, for example, you also need to review the increasing chance of health risks – such as arthritis and dementia – that affect your quality of life and may result in you needing full-time care. These health risks have financial implications too, which should be discussed and factored into your planning.

2. Low interest rates remain relatively low, despite the increased cost of living

While interest rates have risen in a bid to curtail inflation, they still remain low compared to, say, the 1970s or 1980s. At the same time, we have seen stock market valuations fluctuate significantly.

This means the risks associated with investing remain a concern for many clients, not least since the returns derived from some investments are linked to the level of interest rates. This is particularly the case for those who have already retired and would struggle to generate a new income stream

Weighing alongside this has been the dramatic rise in the cost of living, particularly for basic costs such as energy and food.

And while many are confident that the cost of living will moderate – once the supply chain issues linked to the pandemic are finally resolved and the Russia-Ukraine war eventually ends – it is worth flagging that prices may continue to rise for other reasons, e.g. if the wage increases being demanded across many markets are subsequently priced into the cost of goods and services.

Taking into account all of the above, it’s likely that people may underestimate how much annual income they need over the long term or overestimate the level of withdrawals their portfolios can reasonably sustain.

3. Changing pension legislation

Over the past few years, governments around the world have updated pension legislation to adapt to ageing populations and other new trends. And they will continue to have to do so, particularly where individuals have insufficient savings. The UK is not alone in raising the qualifying age for state retirement benefits. Eligibility for Australia’s pension, for example, is rising from 65½ to 67 years by 2023.

And while small changes are regularly implemented – typically related to state pension payment levels and limits for the lifetime allowance – many have not thought through changes such as those introduced in 2015, which saw the pensions landscape in the UK changed radically as investors were no longer ‘forced’ to buy an annuity when they retired.

The new ‘freedoms’, however, mean there is no longer a definitive point when your funds are permanently transferred to an insurance product providing you with a set lifetime income (albeit typically with adjustments for inflation). This has implications for you as you will own all the responsibilities linked to drawing down on your pensions, entering that phase of life called decumulation.

Limited understanding of these changes, however, continues despite the intervening years and due to the complexities and risks (e.g. those of sequence, longevity and inflation) that come with the management of investments. But these are important matters to grasp to help ensure you enjoy a lifetime income over an indefinite period from a finite sum of money.

And as I started with a quote, it feels apt to finish with one. This time, it’s by American country singer and broadcaster Jimmy Dean, who stated: “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.” This reflects the complexity of retirement planning, the balancing of multiple needs and aspirations and risks in order to achieve financial success in retirement.And whatever winds of change might sweep through the future life you have planned, we believe it’s important you should receive support as early as you can, ahead of retirement, in the form of a personal wealth plan. You should also make sure this is regularly reviewed, particularly as you approach the date when you’re looking to retire, and to reflect any changes in your circumstances, and those of your family. In providing the necessary details, it will allow you to live the life you aspire to in retirement and offer the flexibility to change tack as needed. Just get in touch for an initial conversation as we are here to help.