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Posted: March 2019

Financial freedom

Experiencing a golden age without money worries

Saving enough during our working life will not just give us freedom to manage our finances more flexibly, but it will also help us to secure a more comfortable lifestyle in retirement. Even though the baby boomers (the generation born between 1946 and 1964) are better off than any other generation, according to a new report[1], one in three (33%) people nearing retirement in this age demographic still don’t feel confident they’ll have enough funds to live on[2].

Money worries
The Income Roulette Report reveals that more than a quarter (28%) of people expecting to retire within the next five years don’t know how much they have in their pension pot. In addition to money worries, some did not feel emotionally ready for retirement, with one in six (16%) admitting they were worried they would not be as intellectually stimulated, and one in ten (12%) worried they would not know what to do with their time.
The research also reveals that two in five (42%) of those who have already retired feel their financial situation has significantly worsened since doing so. Furthermore, over a third (35%) of retirees feel they’re often hit with unexpected costs like home maintenance, car repairs, or helping their children or grandchildren, meaning they frequently find themselves financially vulnerable.

Greater confidence
It’s essential that people start planning and seeking the necessary professional financial advice earlier so that they can make the transition into retirement with greater confidence. A robust advice process will include encouraging anyone considering their retirement financial planning to compare their current monthly outgoings with their expected outgoings in retirement. This will give a clear indication of the level of income required.

It’s often said that over-55s are experiencing a golden age when it comes to their finances. Entering retirement should be an exciting time, but the research shows this doesn’t automatically mean this group is confident about their retirement plans – both from a financial and emotional perspective.

Financial affairs
On the one hand, ‘pension freedoms’ offer people more flexibility and choice, while on the other, it demands they take greater responsibility for their own financial affairs. It can also help for people to think about where their different pension pots are and if they would be better off bringing them all together in one place. This can ensure they enter retirement with confidence and control over their savings, and greater choice about how to take an income that will provide everything they hope for from retirement.

Trying to figure out how much money you will need to retire can be one of the most difficult financial questions to answer. We can no longer assume that we will be mortgage-free homeowners in retirement. For those unable to get on the property ladder during their working life, a large private rental bill needs to be factored into retirement planning. As a ‘broad rule of thumb’, retirees shouldn’t see a huge change in their standard.

Source data:
[1] ONS March 2018, ‘How do the post-World War baby boom generations compare?’
[2] Methodology for consumer survey: YouGov, on behalf of LV=, conducted online interviews with 8,529 UK adults between 20 and 26 June 2018. Data has been weighted to reflect a nationally representative audience.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.