Chris Exley DipFA Creator of MoneyGeek | Financial Coach | Qualified Financial Adviser

MoneyGeek Digest - Issue 3:
What a difference a year makes (to your retirement plan)

Dear Reader,

I spoke to 19 people last week about their finances - ranging from age 30 all the way up to 70 - and something struck me that I hadn’t fully digested before.

We're all guilty of this.

Me included.

When decisions feel big, uncertain or emotional, we default to round numbers.

• We aim to retire at 60.
• We opt for a 30 year mortgage term.
• We set an investment target of £1m.

Not because we’ve stress-tested those numbers.
But because they feel sensible.
They feel neat.

What's interesting is that behavioural research backs up this phenomena:

Large studies analysing tens of thousands of real-world decisions show that people are far more likely to anchor major life choices to round numbers. They act as psychological reset points - moments that feel clean, rational, and easy to justify.

The problem is that this ease often gets mistaken for accuracy.
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And in financial planning - particularly when it comes to planned retirement ages - these round numbers are one of the biggest and least tested levers in the entire plan.
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Left unchallenged, they can cost a fortune.
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Let me show you a simple example.

How one extra year of work can buy three extra years in retirement

Meet Jane.

She’s 60 years old, earns £100k, contributes £10k per year into her workplace pension, and would like to retire on £36,000 gross per year.

Below are two cashflow models showing when Jane’s pension could run out, based on a consistent set of assumptions.

Both models assume:

• £500,000 of savings at age 60
• £36,000 gross annual retirement spending (including State Pension)
• The same investment growth assumptions

The only difference is the retirement age.

• Top charts: Jane retires at 61
• Bottom charts: Jane retires at 60

In the retire-at-60 scenario, the money runs out in Jane’s 82nd year.
In the retire-at-61 scenario, it lasts until her 85th year.

One extra year of work doesn’t buy one extra year of retirement.

It buys three.

Why?

Because delaying retirement creates a 'triple effect':

• An extra year of potential growth before withdrawals start
• One less year of early withdrawals
• One extra year of saving that compounds over the long term

Put roughly:

• £36k less withdrawn
• ~£25k of potential growth on £500k (at 5%)
• £10k of additional savings

There’s also an important timing effect.

More of the withdrawals are pushed into years when Jane’s State Pension is in payment, meaning her pension doesn’t have to work as hard for longer. With the State Pension covering roughly a third of her required spending, sustainability improves materially.

This is why retirement planning shouldn’t be about picking a neat age.

Round numbers feel comfortable.

Cashflow models show the maths behind the emotion.

And the takeaway from this week’s digest isn’t “everyone should work longer”.

It’s this:

Don’t choose a retirement age because it sounds right.
Test it.

Because even one extra year can materially change the outcome.

Until next week,
Chris

These models are purely illustrative and not financial advice. Growth assumptions are assumptions only. Investment values can fall as well as rise, and you may get back less than you invest.