Jenny Lowe reminds investors that their retirement might last longer than their pension fund

The Utopian dream of retiring at 55 and enjoying those golden years appears out of reach for the foreseeable future.

Ultimately, we are all striving to be happy and healthy in retirement and, as a result, more and more of us are asking questions like ‘how much money will I need in retirement?’ and ‘how can I make sure that what I have now is enough?’

Levelling out
It is often said that life begins at 40, but increasingly this is far from the case on the financial front.

According to a recent poll, wage growth stalls 30 years before the average retirement age.

So, a typical 16 to 20 year old might see their wages increase from £15,000 to £17,500, a figure which then accelerates through the early 30s to reach £35,000 between the ages of 31 and 35 and then flattens out and remains pretty much the same until the age of 55. Not exactly good news.

However, if you couple this with the fact that those currently in their 20s and 30s are responsible for almost 20 per cent of Britain’s total consumer debt, the prospect of today’s youngsters retiring early is a mere pipedream.

What makes the current situation much worse is that it isn’t just the young that are set to feel financial pressure when they reach retirement.

According to the latest Cost of Retirement report compiled by Life Trust Insurance, a quarter of UK adults can no longer afford to retire at the time they had planned.

In fact, as many as one in ten of adults currently working have admitted that, in light of the current economic crisis, they will have to delay their retirement by as much as five years.

Not fully retiring
According to Heartwood Wealth Management, there are currently 1.4 million people over the age of 55 that are planning to work part-time for an average of six years, while also starting to draw-down on pensions savings.

But even for those that feel their financial situation would still allow them to retire early, there is another factor at work – longevity.

Life expectancy has increased dramatically, with the average male now expected to reach 85 and the average female to reach 88. And, if you delve a little deeper, someone at the age of 55 today has a one in four chance of reaching 95 and a one in ten change of making it to 100.

Long-term planning
So not only is your pension pot and the value of your investments taking a hit, you effectively have to provide for a retirement that could last more than 35 years.

The average cost of retirement for a typical household in the UK is now a punishing £413,000 because of inflation and rising life expectancy, and an individual living alone will need £326,700 to retire ‘comfortably’.

Many of us dream of an early retirement but finishing work early incurs significant costs. As well as accepting the loss of career income, early retirees finishing work at the age of 50 will need an additional £373,000, or around £25,000 per year, to fund their retirement.

Perhaps now is the time to find that perfect job, because the chances are you will be there for some time.