Running out of money in retirement may be one major concern for the baby boomer generation but according to a recent Australian study, there is an even more specific worry. Over 50 per cent of those surveyed listed ‘sudden or unplanned financial expenses’ as their major retirement fear. We find the figures underline a concern shared by many in the UK too.
The worry can centre around having to suddenly deal with a health scare or support family members in a crisis. There is the concern that something unforeseen could easily derail any retirement plans, as you would no longer have the security of a monthly pay cheque. You might be drawing a regular income from your pension but could you outlive your savings? How can you be certain your money will last? You may also be anxious that your investments might not recover so quickly from a fall on the stock markets as you no longer have as much time or as many other options to pursue to make up the difference.
The study found that around three quarters of those aged 55 and over are already preparing for retirement, with 70 per cent believing they are on track to reach their retirement goals. Yet one adviser interviewed felt that, in his view, only about 17% of people are actually ready for retirement.
So what are the best ways to plan for retirement and combat the fear of being able to pay for something unexpected? Firstly, it’s important to be realistic about what your living expenses will be in retirement. While some expenses may go down, such as what you spend commuting, others may increase, such as your heating and electricity bills. What might be top of the list when you first retire, such as jetting off round the world, might not be quite so high up once you’re in your eighties or nineties. Be prepared to adjust your planning.
Secondly, ensure you’re making sufficient pension contributions. The State Pension, with the ever-increasing pressure being placed on it, is unlikely to be enough to support the lifestyle you want in retirement so make sure you have made provision for an alternative income. Sadly, people can often be complacent about their finances unless something catastrophic happens.
Finally, keep in mind your overall goals for retirement. The survey revealed that 60 per cent rated being debt free as a primary objective, 48 per cent were saving up to travel and 33 per cent wanted to boost their savings accounts. With hindsight, almost 40 per cent said they would have started saving earlier and one in three would have made additional pension contributions. Interestingly, one in 10 said they would have postponed their retirement until they were older.
If you would like to speak with one of our advisers to make sure your own retirement plans are on track, do get in touch