Thanks for providing the UK perspective. In the US, people seem to have an aversion to annuities due to the fact that, for decades, most of the annuities offered here carried exorbitantly high fees. Now, however, a low-cost variable annuity is likely one of the best ways to make it through a very lengthy retirement.

Regardless, we’re faced with the same issues as you: Longer retirements means more years of expenses plus more negative effect from inflation.

“It’s a shame that something so fantastic as our ever-improving health is causing such financial problems.”

Well said.

What I would like to add is that increasing life expectancy is hitting British pensions especially bad. Here in the UK the standard way of converting a pension pot into income is to buy an annuity (indeed most people are obliged to use at least 75% of their pension pot to buy an annuity). But because of longer lives (and recently falling gilt yields) annuity rates have halved over less than two decades for those retiring at 65 – in 1990 you could get 15%, on a standard level annuity (i.e. not inflation-linked); now 6.5% is the best rate around. (See http://www.guardian.co.uk/money/2009/apr/12/buying-annuities-pension-advice )

Moreover, the longer a pensioner is going to live after retirement, the more they lose to inflation unless they get an index-linked annuity, which pays an even lower rate. It’s a shame that something so fantastic as our ever-improving health is causing such financial problems.

I wrote the article exclusively with retirement savings in mind. But you’re absolutely right.

Thanks. This piece was really well written.