With the average life expectancy at an all-time high and expected to continue to climb, baby boomers and future generations face a serious challenge in planning for retirement.

Living longer means having to save more for retirement and many boomers are finding they are working later into their golden years because a miscalculation could be disastrous to savings.

According to a report from the Society of Actuaries released last summer, more than half of retirees and pre-retirees underestimate the age to which a person can expect to live.  The report shows a 65 year old man has a 41% chance of living to age 85 and a 20% chance of living to age 90. A 65 year old woman has a 53% chance of living to age 85 and a 32% chance of living to 90.

A recently-released report from HSBC Bank shows retirees are facing a major decline in their living standards in the last seven years of retirement due to inadequately funded retirement savings. The report, which surveyed more than 15,000 consumers in 15 global markets, also details that the average retirement length is 21 years, but the median time before retirement savings run out is 14 years.

Andy Ireland, executive vice president of retail banking and wealth management for the bank, answered the following questions as to how baby boomers and retirees can avoid this trend:

Boomer: The survey showed retirees are facing a significant decline in their living standards during the final years of retirement. How much money do boomers need to adequately fund retirement?

Ireland: The amount of money needed to adequately fund retirement needs to be determined on a case by case basis. The best way to overcome the shortfall that U.S. retirees are facing in the last seven years of retirement is to sit down with a financial advisor and create a plan specific to your needs.  Some may need or desire 50% of current income to stay comfortable in retirement, while others may need 75% or even more than 100% of their current income. 

 Boomer: When do we start planning and saving for retirement?

Ireland: HSBC’s report shows that saving and financial planning start at varying ages across the globe. Overall, respondents understand the importance of planning early and on average think that the age of 36 is the latest by which they can start planning financially and still expect to maintain their standard of living in retirement.

In the U.S., planning for retirement begins slightly earlier than the global average (age 28 vs. age 30), and retirement saving starts two years before retirement planning. Still, only 49% of US respondents are regular savers. 

Boomer: With the economic downturn putting added pressure on household incomes, many pre retirees find they are not financially prepared for a comfortable retirement. What steps can they take to ensure they stay on track for retirement? 

Ireland: Major life events can derail a person’s efforts to save for retirement  Thirty-four percent of those surveyed said that the recession/economic downturn has impacted their ability to save for retirement. Of those who have never saved for retirement, over half (56%) are being held back by the cost of day-to-day living. In order to stay on track, individuals should plan ahead by composing a detailed financial plan with a professional adviser and reviewing it regularly.   While events like the recession or a life crisis such as losing a job might be unforeseen, other major life events like starting a family and expensing a child’s education can be better managed if properly planned for. 

Boomer: What are the five tips identified in the survey that individuals can take to improve their financial well-being in later life? 

Get real about your retirement needs. Through education and guidance from financial advisers, you will be able to better understand how much income you will need in retirement and how to better prepare for all the financial risks associated with growing older.

Put your savings priorities in order. Work out a realistic budget that works for you and make sure that your long-term financial planning, including the need to save for retirement, isn’t overlooked against what might seem like more pressing financial needs. Ring-fencing even a small amount of monthly income towards retirement planning can help to make a major difference in the future.

 Be aware of how major life events affect saving for retirement. You never know when a life event may impact your savings, so where possible, you need to ensure that you have access to some emergency savings and investments as well as appropriate insurance to deal with periods of unemployment and long-term illness which may prevent you from working.

 Make a plan for the future -  Any type of financial planning for retirement, including informal ways such as using online planning tools or ‘to-do’ lists, is a good starting point. Eventually you should seek to draw up a detailed written plan for the future, which should be reviewed regularly.

Use professional advice to improve your savings position. HSBC’s report found that 49% of respondents saved more for retirement as a result of having a financial plan in place. Reviewing your savings situation and retirement potential with a professional financial adviser now can help to ensure that all your future retirement needs are identified and that comprehensive plans are put in place.