If you are lucky enough to reach your 100th birthday, you will receive a personal birthday card from King Charles. The Anniversaries Office at Buckingham Palace has been sending out these congratulatory messages from the reigning monarch every year since 1917.

When the practice first started, reaching 100 was very unlikely. In fact, according to Statista, the average life expectancy in 1915 was just 52.02 years.

Yet, with all the improvements in healthcare and living standards, life expectancy has grown considerably. Indeed, Aegon reports that 1 in 4 children born in the UK today can expect to live to 100.

While clients who are approaching 50 now may not be quite as likely to reach 100, it is still more common than many people think. And if they do become a centenarian, they may need to consider how this will affect their retirement plans.

Currently, when people reach 50, they might start thinking ahead to the end of their working lives and typically, retirement is seen as the final stage of life. However, if you are more likely to survive to 100, you may have to change your approach to your later years because you could only be halfway through your life.

The “second 50” – the phase of life between age 50 and 100 – may be difficult to navigate and many of the traditional retirement planning routes might not be suitable anymore.

Your clients who are approaching 50 could find themselves in unchartered territory but, fortunately, working with a financial planner may help them overcome potential challenges.

Read on to learn how a financial planner could help your clients navigate their second 50.

Only 27% of people in employment are planning a “hard stop” retirement

Attitudes toward retirement are changing and the idea of a “hard stop” retirement – finishing work altogether – is less popular than it used to be.

According to the Aegon report, only 27% of people in employment are planning a hard stop retirement, with the rest considering varied approaches to work in their later years. For example, some might continue working indefinitely while others could reduce their hours.

This may be driven by concerns about running out of savings if they live longer in retirement. However, 57% of people said they wanted to continue working because they enjoyed it, while 54% wanted to keep their mind sharp.

Whatever their reasoning, clients who want to continue working in some capacity may need to consider how this affects their retirement plan.

For instance, if they generate some income from working part-time, they might supplement it by drawing flexibly from a defined contribution (DC) pension. However, this could mean they lose certain tax benefits when contributing to their pension in the future.

Additionally, they may be able to delay their State Pension if they are still earning an income from work. This could mean that they receive a higher payment when they eventually start drawing their State Pension.

Some clients might also want to change their investment strategy if they are less likely to cash in investments until later in life.

Ultimately, if they decide to continue working instead of opting for a hard stop retirement, they may need to change the way that they draw an income from their retirement savings. There could also be tax implications to consider. 

A financial planner can help them navigate this to ensure their retirement plan aligns with their new approach to working later in life.

Longer life expectancy could mean that your clients need to accumulate more wealth or adjust their budget

Perhaps the biggest challenge in navigating the “second 50” is that your clients may have to fund their retirement for far longer than they anticipated.

Many people approaching retirement might be unprepared as they underestimate their own life expectancy. A 2022 survey by Ipsos revealed that only 14% of people in the UK believed that they would live to 100.

As a result, your client could live much longer than expected and this might mean that they spend their savings too quickly, leading to challenges later in life.

There are two potential solutions to this issue: accumulating more wealth or adjusting their retirement budget.

A financial planner can discuss various options for accumulating more wealth, including investing or increasing pension contributions. We can use cashflow planning to demonstrate how a change in contributions might affect the size of their pension pot in the future.

Alternatively, we can use cashflow forecasts to give them an idea of how long their savings could last, depending on their average spending in retirement. We can then help them adjust their budget, if necessary, so they may be less likely to deplete their savings too quickly, even if they have a long retirement.

The average cost of a residential care home could be £39,000 a year in 2024

Finding a way to pay for care is another significant challenge that your clients may face during their second 50.

According to the World Health Organisation (WHO), global life expectancy increased by 6.6 years between 2000 and 2019. Yet, healthy life expectancy – the number of years you live in good health –only increased by 5.4 years.

As a result, people might live longer but they may also spend more of their later years dealing with health issues.

This could mean that your clients need to pay for care over a longer period of time, and this can be incredibly expensive. Indeed, the UK Care Guide reports that the average cost of a residential home ranges from £27,000 to £39,000 a year. And, if you require nursing care, costs could increase to anywhere between £35,000 and £55,000 a year.

It’s crucial that your clients consider this potential cost ahead of time and factor it into their financial plan. If they don’t, they could face significant issues in the future and may be forced to sell property or use other important assets to pay for care.

Fortunately, we can help your clients estimate how much their care might cost and explore different ways to potentially pay for it. That way, if they have a long retirement and face serious health issues, they are more likely to be able to afford the care they need.

Get in touch

The “second 50” could present various challenges for your clients, and we are here to help them overcome these hurdles.

They can contact us at hello@ardentuk.com or call 01904 655 330. As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.  

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate cashflow planning.