5 effects living longer has on your finances

We’re an ageing population with increasing life expectancies but what affect will a longer life have on your finances?

Increasing life expectancies mean some UK citizens can expect to live almost a generation longer than those gone before.

As well as changes in lifestyle and medical advances, increasing life expectancies can be attributed to your location.

According to an update from the Office for National Statistics, males born in Glasgow in the second half of the noughties can expect to live till they're 72 years old, on average. Whereas females in Chelsea are anticipated to live to 90 years; a full 18 years longer.

The Glasgow Effect

The so called “Glasgow Effect”, first identified by Dr Linsay Gray, Investigator Scientist at the University of Glasgow, is an unexplained phenomenon whereby the life expectancy is lower there than in Manchester or Liverpool, despite the cities having identical social and economic characteristics, including the size and distribution of poverty.

Research found that Glasgow has 45 per cent more deaths among those aged between 15 and 44 years old, and lower life expectancy even in richer areas.

University researchers also reveal that there are 30 per cent more cases of lung cancer, and twice as much alcohol and drug-related deaths in Scotland than in the two English cities, with higher rates among men, but also with twice as many suicides among women.

Whether this is cultural or has other contributing causes remains to be clearly shown, but one thing is certain; how long we live has a huge effect on our finances.

1 Learning from previous mistakes

Insurer Standard Life has just reported that more than three quarters of a million 45 to 65 year olds now expect never to retire because of financial pressures. We can expect that millions more may retire on time, but won't live as comfortably as they had hoped.

Saving for our later years requires more effort the longer we expect to live, as our pot of money has to stretch out for longer.

2 How to calculate your pension

Estimate what your annual costs will be when we retire, and how much you need to save to get there. It may help to use an annuity (pension income) calculator and to see what the government currently says it'll pay you. You should review your estimates once a year.

3 Your money can work longer for you - or against you

Obviously, the best way to build a good pot is to start saving early.. It's not just that you put aside more money by starting earlier, but the gains you make in savings interest and investments are also likely to roll up into a much bigger snowball.

The opposite effect occurs if you have a casual attitude to debt, perhaps because you know you'll have longer to pay it off. The snowballing effect of debt interest and charges will permanently destroy lifetime wealth. Avoid it and pay debt off quickly.

4 More time to pay off a mortgage

We also have the luxury of being able to buy a house later in life and still hope to pay it off before retirement. That's good news because, with a growing population, more people living alone, and more of us living longer, the demand has been growing faster than supply, which has, you may have noticed, pushed up prices in recent decades. We need the extra years we're now expecting to get in a position to buy property.

5 More taxes to pay for older folk

Many of us will see an ever-growing portion of our wealth being distributed to others due to more people living longer, supported by growing medicine, surgical techniques and care homes.

Ultimately, much of this support will be paid for by younger people through taxes.

This is a good opportunity to think about saving as tax-efficiently as possible to reduce the amount you pay in your lifetime. You can keep your savings away from the taxman in cash ISAs, for example, which are tax-free savings accounts.