'Plan your pension now' Dorset money expert warns 40-55's
Around two thirds of us haven't factored in how much socialising might cost
Trips to the seaside, pints in the pub and coffees with friends are amongst life’s little joys Generation X crave most for their post-work years, but many could be facing a pension without all the trimmings according to new research from MoneyHelper.
12 million Gen Xers (88%) have not calculated how much they will need to live on in retirement and less than a third (29%) have considered the cost of socialising at this stage of their life.
Over 2,000 UK adults aged 40-55 years were asked to take stock of their hopes for retirement. The pandemic has meant of those planning to retire, four in ten (41%) have reassessed their priorities for retirement such as what they will spend their income on, and 33% of Generation X want to prioritise socialising over ‘big ticket’ items and experiences such as holidays.
Over two thirds (73%) said spending time with family and friends is more important to them now, and (55%) are making a more conscious effort to socialise with their loved ones.
The simple pleasures Generation X are most looking forward to in retirement are:
• A trip to the seaside (42%)
• A meal out in a nearby restaurant (34%)
• A coffee with friends (33%)
• Gardening (32%)
• Entertaining family and friends at home (28%)
• A drink in their local pub (24%)
Money Expert, Sarah Porretta, told Greatest Hits Radio Dorset:
"Most of us haven't really worked out how much are we going to have to live on in retirement, and how realistic are those coffees and meals out and things like that.
"It can be a bit of a shock for some people and what we want people to do is go on and work it out now.
"If you're 45 you've still got 20+ years of work ahead of you so there is still time to make changes if you've not been putting enough away up until this point."
However, while those surveyed were most likely to say they want to enjoy a meal out, a coffee with friends and a drink at the pub once a week, they may not be able to afford these things as often as they’d like if they are on track for a ‘moderate’ standard of retirement.
The recommended ‘moderate retirement’ budget for eating out is £900 a year2 but Gen Xers would need £1,013 to enjoy the social life they want in retirement – and could have to cut back on six weeks of dining out, or the equivalent of 33 coffees or 9 restaurant meals.3
Sarah added:
"I think we've seen our parents generation and we've seen them living quite a comfortable retirement, and maybe most people expect they're going to have that as well.
"I got a bit of a surprise and my husband got more of a surprise because he had a much smaller pension pot than me.
"Knowing is the real key. If you don't know and you suddenly find out at 68 that your retirement is not going to look how you hoped, that's too late."
Research from the International Longevity Centre has shown that just 7% of Generation Xers with a defined contribution pension are saving enough to achieve a moderate lifestyle in retirement.4 This means some could face a watered-down retirement.
According to the findings, four in 10 (39%) 40-55 year olds have been negatively impacted by the economic downturn and effects of Covid-19. More than a quarter (27%) said their retirement pot will likely be smaller due to being furloughed or made redundant during the pandemic, whilst 27% also said they will have to retire later due to the financial impact of Covid-19.
Tips on how to start planning your retirement finances include:
• Try Couch to Financial Fitness
• Track down your pension pot(s) and check their value
• Think about your living costs in retirement
• Think about what age you’d like to retire and when you would want to access your pension savings
The effort put into pension planning now means that you can literally dine out on your efforts when you do reach retirement. All spokespeople are available to discuss the research and remind people it is not too late to take action.