In the UK it is estimated that a male born in 2011 has a one in four chance of living for 100 years and an even greater chance if they are female – one in three.
Indeed, around the world people are living longer than they ever have done before.
By 2040, the number of people aged 85 and over will have nearly trebled, while there will be nearly 3 million aged 100 or over*.
This stark demographic shift will impact every level of society. Governments will obviously need to make provisions for older populations, but individuals are also being forced to consider a scenario that their parents or grandparents would never have had to contemplate. That is, the prospect of funding a potentially 40+ year non-working life from the conventional 40 years of work.
Of course, for most, the maths simply won’t stack up and the likelihood of retiring sometime in your sixties is a completely unrealistic concept. But as well as working longer, people also need to think differently about their own financial planning. Instead of merely saving up and then accessing that cash, it’s perhaps more pragmatic for pre-retirees and retirees to focus on maintaining a sustainable stream of income from their investments.
For pre-retirees, investments that provide sustainable income can help prolong the time before accessing traditional guaranteed-income products, such as annuities. While those who are retired have the option of reinvesting a proportion of the income if they choose to bolster their savings and benefit from the effects of further compounding.
What is clear, is that we are in uncharted waters and the traditional methods of funding later life are less and less relevant as we live longer.
*US Census Bureau, International Data Base (IDB), Office for National Statistics.
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