04 October 2006
Nine out of 10 people are at risk of using up all their
retirement savings before they die, instead having to rely on the
state in their final years, according to finance firm Fidelity.
Fidelity says that this is because people routinely
underestimate how long they will live in retirement, and warns that
increased longevity means that people will need more money put
aside.
According to research by Fidelity, a person who is currently 65
has a 50:50 chance of reaching age 87, and a couple retiring at age
65 have a one in six chance that one of them will live to be
100.
Simon Fraser, president of institutional business at Fidelity,
said: "People could find themselves in retirement for up to 35
years, almost as long as they spent in their working lives.
"People need to be much more informed about the rate at which
they dip into their capital, otherwise they are in danger of
burning through their savings well before they die."
Fidelity calculated that if a retiree spent 10% of their
retirement savings pot each year of retirement, taking inflation
into account, they would be left with no money within eight years.
Even a more modest rate of 6% would see retirees use up their
savings within just 15 years. A more modest withdrawal rate of
around 4% would protect peoples' retirement savings from
disappearing altogether.
