Retirement is a chance to do more of what you enjoy. When it comes to planning for your retirement, you need to think about what you’d like your life to be like. There is no set retirement age in the UK any longer, so you can carry on working as long as you like (or as long as you need to).
When we talk with people about their futures, we hear this concern more than anything else: ‘What if I don’t have enough money to make it through retirement?’ And after years of stagnant interest rates, drops in annuity rates and rising inflation, these events have had an impact on the cost of living for some of those relying on pensions, savings or fixed retirement incomes.
Pension pot not as big as expected
Longevity risk means outliving your assets. If this happens, you may have to change your standard of living and, possibly, go back to work. Research conducted by Saga revealed that over a quarter of people are finding the lifestyle they dreamed of in retirement may no longer be affordable. As a result, enjoyment of their retirement is at risk, with socialising in particular cut down in order to preserve an inheritance for their children.
The mismatch between retirement expectations and reality revealed that 40% admitted their pension pot was not as big as they expected, one in three had not forward planned their finances, and a third are concerned about leaving an inheritance to their children.
Not considering retirement finances
Almost one in five adults believe that their children depend on a future inheritance, and 53% would feel guilty if they didn’t leave an inheritance. Unexpected costs affecting 28% of people have also been highlighted as a risk to enjoying retirement.
It is no longer the case that older homeowners are ‘rich’. While some individuals may be asset-rich, the reality is that for some, cash flow is more of an issue. Debt in retirement is becoming more common. One in fourteen people in their 60s and above are still paying off a mortgage, and one in six paying off car finance or another kind of loan for either themselves or their children. Typically, those who still have outstanding debt in their 60s are spending 18% of their income on paying it off.
Feeling the squeeze on a fixed income
People’s expectations about their retirement age have changed considerably in recent years. Changes to the State Pension and the impact of an increasing life expectancy have had a big effect. But the economic situation over the past decade has left many people on a fixed income feeling the squeeze. The research has shown that people increasingly see their property as an asset which forms part of their retirement planning.
Saving for retirement is vital, but many people still ask: ‘How much pension do I need?’ The amount you need to save each month depends on the lifestyle you plan on having once you stop working. And if you’re not on track, there are measures you can take to help fund a potential gap in your savings.
 Saga Personal Finance – 9 October 2018