Human beings are invariably prone to exaggeration and embellishment, but it seems with regard to longevity and mortality we tend to vastly underestimate how long we think we’re going to live to.

In our defence the goal posts have been moving as life expectancy rates continue to rise but perhaps we consider relative benchmarks – how old did both sets of grandparents live too, unless they’re all still alive! Or for the elder demographic among us, how old did our parents live to?!

Regardless of how we arrive at an estimate of personal life expectancy, underestimating by even a few years can prove potentially disastrous for savings pots and calculating the level of assets needed to fund their retirement. A situation compounded by the uncertain nature of investing and one’s attempts to accurately project investment return levels over time.

Thus armed with inadequate tools for calculating life expectancy and savings projections, individuals are often left at the losing end of the pension game with insufficient savings and no time in which to make up the shortfall.

Few imagine living to be 100 but in reality more people than ever can expect these days to get a birthday card from the Queen. If the Queen manages another 25 years herself then by 2039, it is estimated that there will be over 83,000 living centenarians in the UK who would have received a well wish card from Her Majesty.

Perhaps time to invest in Hallmark or funkypigeon.com?

In fact, the number of centenarians in the UK has more than quadrupled over the past 30 years to reach 13,780 in 2013 and up from 3,040 in 1983, according to the Office of National Statistics.

Most people estimate they will live to an average of 81 years. But the ONS says women have a 58% probability of living past age 85 while men have a 45% chance of living this long.

Couples have a 50% chance of one of them living till age 90 and a 4% probability that one will still be alive at age 100.

Although it’s good news that people are living longer – more will get to see their great grandchildren and have a few more decades to achieve their life ambitions.

But the truth is the vast majority of individuals are not prepared financially for such an extended lifespan and are due to face a significant shortfall in their pension funding.

To live comfortably in retirement, it is estimated people need at least 60% of their pre-retirement income but most pension pots will not deliver this. This shortfall will largely be due to miscalculations when saving.

Most people expect to fund around 16 years in retirement, calculated on their assumption of retiring in their early 60s and dying in their 80s – but they could in fact end up funding at 25 years in retirement.

Unfortunately, there are few tools available to help people project their life expectancy, making planning difficult, if not impossible.

The government has dabbled in providing pensioners with life expectancy projections, but for savers, these projections should be available sooner to allow them to start building nest eggs that can see them through well into their 90s.

Millennials, for instance, will benefit the most from improved healthcare and lifestyles. Therefore this group of individuals need to save more to fund their extended years in retirement. A worrying statistic is that individuals in this cohort group are the most reluctant to save into a pension, yet on average plan to retire by the time they are 64! Something unlikely to happen once reality kicks-in in a few decades…

There are also concerns about the lack of savings following the new pension freedom rules, which offer unprecedented access to pension pots at age 55.

Around 60,000 people have already taken advantage of the new rules, with data published by the Association of the British Insurers (ABI) showing £4.7 billion withdrawn from savings between April and November this year.

Without the right education, individuals risk withdrawing too much money without realising just how many years of retirement they actually have left.

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