Retirement is no longer a linear journey

Retirement is very different these days. For example, in the 1960s, men typically retired at 65 and women at 60Once retired, men could expect to live on average for 12 more years, to 77 (women fared a little better and could expect to live to 80). Not many people continued to work.

Contrast that with today. A 65 year-old man has a one-in-four chance of living to 92 and a 65 year-old women to 94. This has profound consequences for retirement planning. Retirement is no longer a fixed point for many people; they may continue to work in some capacity, or return to the workplace after they’ve retired. And a longer life isn’t necessarily a healthier life. On average, men and women will spend around half their retirement in ill health.

This means retirement is much less certain. Spending patterns will rise and fall as different challenges arise, such as physical and mental decline. It also has implications for transferring wealth. For example, children could be in their 50s when parents die and may be settled financially. Should transferring wealth be considered much earlier? 

Structuring income in retirement is more complex and should recognise the different types of expenditure, reflecting how these costs change in different phases of retirement.

The model below provides a framework to prioritise expenditure throughout a client’s retirement.