Between 2000 and 2019, the average life expectancy worldwide has gone up by over six years, rising from 66.8 years to 73.4 years, according to the World Health Organization (WHO). This means that people are living longer, which is good news. However, if someone lives longer than they thought they would, they might not have enough money saved for retirement. If this is the case, a retiree may find themselves unable to continue to live their chosen retirement lifestyle or, worse, dependent on others when their money runs out.
As people live longer, they face another problem which is inflation. It means the cost of things they need to buy increases over time, making it difficult for people who have a fixed income, like retirement savings, to buy what they need. This can be a problem if they can’t afford the same things they planned to buy before retiring.
Plan to have money for longer than most people live.
Living longer than expected is good, but if retirement money stops at that point, life might not be as good. To avoid this, plan to keep getting money even after you’re supposed to die. Don’t include money you want to give to others. This way, you can live better for longer. If you keep living longer than you planned, you might need to change your plans.
Create a backup plan
When you retire and don’t earn much money, inflation can make it harder to buy things you need. To avoid this, you can plan to have extra money saved up to cover for inflation. For example, if you think you need 4,000 AED each month to live, try saving enough to get 5,000AED each month instead. If you think 5,000AED is enough, save for 6,000AED. This way, you can stay comfortable even if prices go up.
Consider Investing with guaranteed lifetime payouts.
When you retire, some of your money might come from places like pension plans or Social Security. This kind of money is good because it can help you if you live longer than you expected. But sometimes, it’s not enough because prices might go up and make it harder to buy things. If you have mostly this kind of money, you might not want to add more. But if you have more money from things like stocks that can go up and down, it might be good to add some more money that will always stay the same. This way, you can be sure you’ll always have enough money, even if you live a really long time.