How long does your money need to last?

4 Oct

Managing money in retirement would be a lot easier if we all knew how long we were likely to live.

In a world where buying a secure income has become less common, having a realistic picture of life expectancy is a necessity. Whilst this can be a challenge, there are some important pointers that could help you avoid the pitfalls when thinking about life expectancy for financial purposes.

What are the misconceptions?

The first big misconception comes from the figures we read in the newspapers. According to the Office for National Statistics (ONS)*, life expectancy at birth in England and Wales is just over 79 years for a man and just under 83 years for a woman.

As a result, anyone turning 65 and hearing these figures might assume that their money only needs to last them 14 years if they’re a man and 18 years if they’re a woman. But, of course, they’d be wrong.

A lot of people don’t make it from birth to pension age which decreases the average figure for life expectancy at birth. Amongst those who do make it to age 65, the ONS says that on average, men can expect to live for over 18 years more and women can expect to live around 21 years more. This is already 3-4 years more than the life expectancy at birth figures. There are two reasons why even these numbers could still be misleading.

1. The first is that there’s a link between wealth and life expectancy. As the Cridland Review* of state pension ages highlighted, even within a single city, there can be a difference of several years in life expectancy between the least and most deprived areas.

2. There are two ways of measuring life expectancy: ‘period’ life expectancy, which takes account only of past changes in longevity and ‘cohort’ life expectancy which also includes projections of future changes. Many published figures are for ‘period’ life expectancy, so they don’t take account of the long-term improvements in life expectancy that we’ve seen in recent decades.

What are your chances of living to 100?

For a more realistic set of expectations, a good place to start is the ONS ‘What are your chances of living to 100?’ calculator ( The calculator uses cohort data and considers both the average figures and the likelihood of more extreme outcomes.

Cashflow forecasting

Once you have an idea of how long you’re likely to live, you’ll want to understand whether your money will last as long as you need it to.

Cashflow forecasting, or modelling, can be a key tool in the financial planning process to help you understand and visualise your future financial needs and requirements. Complementing the knowledge you receive from your adviser, cashflow forecasting enables you to forecast your financial position year by year, combining a number of factors such as expenditure, inflation, investment returns and tax rates.

Most importantly, it visually helps to bring your money to life, helping you to manage your assets, future goals and attitude to investment risk.

Need advice?

Craig Butler is a Chartered Financial Planner and member of the Society of Later Life Advisers (SOLLA). If you have any questions about planning for and managing your money once you retire, get in touch today on 02920 853750 or email

*Sources: Royal London (2019), Office for National Statistics (2018) and Cridland Review 2017