According to recent research by Canada Life, people aged 50 and over are underestimating their life expectancy by several years, contributing to a growing ‘retirement gap’.
On average, individuals in this age group believe they will live until around age 80, regardless of gender.
However, data from the Office for National Statistics (ONS) contradicts these beliefs. ONS data shows that a 50-year-old male can expect to live until age 84 on average, while a 50-year-old female can expect to reach age 87.
The discrepancy between perceived and actual life expectancy has significant implications for retirement planning. The majority of people tend to opt for unsecured retirement income, which can be problematic if they live longer than anticipated.
Nick Flynn, retirement income director at Canada Life, highlights the critical role of longevity risk in retirement planning and the challenges it brings: “If people are underestimating their life expectancy, this opens up a new retirement gap.
“Men and women thought they would live to age 80, despite the stats showing on average men will live for a further four years and women a further seven years.
“One in four women aged 50 today can expect to enjoy retirement into their 90s, living till age 95.”
Addressing one’s own mortality is inherently difficult, but avoiding these conversations can lead to insufficient retirement income. Flynn argues that annuities, despite being often overlooked, are the only absolute guarantee against outliving one’s pension. Given the substantial improvement in rates over the past 18 months, they deserve serious consideration.
Flynn concludes by emphasising the importance of professional advice in ensuring a secure retirement: “A professional financial adviser is best equipped to talk you through the various options, to ensure your plans remain on track throughout the course of your retirement journey.”
