Three ways to make your retirement money last

Pensioners There are only three solutions to the fact that the majority of us aren't saving enough for retirement but according to new data there looks to be a bias in favour of one outcome.

If you haven't got enough money saved for old age there is only one of three things you can do: sacrifice now and save more for later, downgrade your expectations and live more frugally in retirement, or keep working and retire later.

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There is of course the fourth option of win the lottery and retire tomorrow but that's not going to be a reliable option for 99.9% of us.

The Institute of Fiscal Studies has found that there has been a considerable increase in the number of people working for longer. This has a lot to do with the increase in women's state pension age, which started increasing in April 2010 from 60-years-old and will keep rising until 2020 when it is equalised with men at age 66.

Currently the state pension age for women is 61 years and five months.

As most people retire when their state pension kicks in, it's unsurprising that people are choosing to retire later in life and the number of working women aged 60 has increased by 27,000 between April 2010 and April 2012. This means just over half, 51.4%, of women aged 60 are now in employment.

This has had a knock-on effect as the husbands of older working women are retiring later too, with the number of working husbands increasing by 8,300 over the two year period.

The increased number of women and men working does point to the fact that most people use the state pension as the 'anchor' in their retirement plans and are being forced to work until state pension age.

The problem is that we are living longer and the government plans to link the state pension age to longevity, meaning that we will get the state pension later and later.

It's financially beneficial to the government to keep us in work, the IFS estimates that paying out pensions later saves £2 billion a year and that the taxes paid by older workers adds another £190 million to the coffers.

The problem is working until your late 60s or even until your 70 is not the picture we have of retirement. And if you, like me, would rather be relaxing in France rather than doing a shift at Tesco when you're in your 60s, it's probably a good idea to pick another of the three options above.
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