The latest news on retirement is that it s a very expensive luxury. Maybe your grandparents seemed to lead a blissful existence, with Grandad happily pottering in his greenhouse and Grandma having plenty of time to enjoy hobbies and planning their days out. Times have changed and reality has kicked in.
The fact is that recent figures show that an average twenty year retirement would typically cost in excess of 400,000 pounds. The figures have been worked out based on a couple where the man retires at 65, with an expectation of living to 85. Even more scary is the fact that if the couple make it to 100, which is not so unusual these days, their retirement costs will come to nearer one million pounds.
These calculations show a far higher cost than the vast majority of people are able to achieve. Research shows that most people s pension pots are sufficient to generate up to 1,500 pounds per year. Some people have more than one pension however. With the minimum income which is guaranteed through pension credit being currently around 200 pounds per week there is likely to be a major shortfall. When people currently retiring were at the start of their careers and buying their first houses, an average semi detached home could be bought for around 4000. The thought then of needing a retirement income of three times this amount per year would have been thought laughable.
A spokesman for one of the major pension companies quoted People are living longer, healthier lives. This is great news, but only if the have the finances in place to really enjoy their post career years. The combination of rising life expectancy and the impact of inflation over time can have huge financial implications and for the first time we can see the scale of these trends.
It seems that a person in their mid 50 s at the present time has a 25 per cent chance of living until they re 95. This is really good news, but that s an awful lot of retirement to fund. Obviously spending patterns will change over the years. Recently retired couples tend to spend a large chunk of their income on holidays which they have time to take at a relaxed pace, without the call of the office and time limits to consider. Transport and eating out will eat up a fair proportion of the income.
As the couple age, a higher proportion of income will go on changed housing needs, power, fuel and food, with slightly less being spent on leisure and holidays. By the time the couple reach their 90 s the major costs will be related to housing, power and fuel. It seems that 92 is the peak age for spending. This is still an awfully long way off for someone aged 50 at the present time and there s a lot of money to be spent in getting there!
If these statistics come as something of an eye opener, maybe it s time to think about your own retirement plans. Don t put it off sticking your head in the sand now can do nothing but cause more hassle in the future.
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