Have you got enough money for your retirement?
Your retirement may be many years away. It may even be decades from now until you plan to retire, but I am sure you have an image of that retirement. Pottering around in a large garden, four holidays a year – maybe even a luxury cruise or two or a holiday home in the South of France. The good life.
All very enviable and achievable, right? But prepare yourself for some shocking pension facts you might not be aware of, which will definitely make you save more for retirement.
1. Pensioners in poverty
The reality of retirement for millions of people is actually quite stark. According to the British charity Age UK, 1.8 million pensioners in the UK live in poverty – that is one in six, while a further 1.2 million are described as being “on the brink” of poverty.
I’m sure you are reading this and thinking “that won’t be me”, but what if something were to happen which stopped you working earlier than you had planned? How many years do you think you could make your pension or savings last in retirement? What happened if your spouse became ill and you had to look after them? With neither of you working, what would retirement look like then?
The solution, other than winning the lottery, is to save as much as possible, but how much do you need to save to generate a decent income?
2. You will need to save hundreds of thousands for retirement
This is actually quite a complex question as rates of inflation and interest, among other things, all have an impact. However, based on the pound’s current value, if you kept your money invested after you retired with it generating 6% per year, you would need to have saved £600,000 to achieve an annual income of £50,000 per year for 20 years.
This assumes you plan on leaving none of your pension to a spouse or family member and don’t live any longer than 20 years. But research shows, the reality is most people underestimate how long they will live for and unfortunately the latter stages of life can be the most expensive.
3. Long term care
The number of people expected to require long term care in old age is forecast to grow exponentially over the coming decades, as medicines and cures allow people to live longer. This is clearly great news for you, but probably less so for your finances.
There have been many studies which have looked into this, with estimates suggesting the need for long term care will double in the next few decades.
The simple truth is it is increasingly likely people will see out their last days in a care home and this costs money. Without making proper provisions or without the savings to cover it, this can sadly mean the loss of a family home, as it is sold to cover the costs of care.
It is very easy to think of retirement as a far off, distant part of your life for which you can prepare “tomorrow”, but the reality is that, to have any hope of achieving the retirement you probably want, you need to put building blocks in place early on in your working life.
If you would like further information about what you can do to help build a happy, financially secure retirement, click the link below to download our free guide to pensions.
