Two-thirds of adults planning to retire this year risk running out of money during retirement, warns a new report.
Despite the average retiree planning to spend just £21,000 per year in retirement, at least one-third of to-be pensioners told Standard Life Aberdeen they have less than £100,000 saved.
On average, when state pension and personal savings are taken into account, Standard Life found the average pension pot to be worth £366,000- enough to last 17 years, without taking changes in the cost of living into account.
Vast numbers of those retiring this year risk running out of money in their retirement. Retirement is a marathon, not a sprint, and many could be going into it without sufficient preparation or planning. Pension pots are without a doubt the most popular option for funding retirement, but it’s so important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.
Almost two-thirds of people planning to retire this year have brought their plans forwards due to Covid-19, according to Standard Life.
Despite this, only two in five people said they feel very confident that they have enough money to retire comfortably.
At the start of the year, pensions provider LV found that more than 154,000 people aged 55-64 brought forwards plans to retire as a result of Covid-19: either due to redundancy, reduced income, fear of contracting Covid or re-assessing their priorities.
Some 211,000 people in the same age group reported tapping into their retirement savings to cope with redundancies or reduced income due to the pandemic.
Speaking in January, Managing Director of Savings and Retirement at LV Clive Bolton said:
Early retirement is attractive for many people – but it can become a financial nightmare if it is forced on people without any planning because of redundancy or illness. Your 50s are critical years for retirement planning because that is the age when many people’s earnings and pension contributions peak. Being forced to end a career before you planned will disrupt retirement plans.
The ‘Class of 2021’, as Standard Life dubs this year’s retirees, has no misgivings about this: more than half (51%) of those who opted for early retirements say they are worried about not being able to enjoy the things they planned.
John Tait called on those daunted by their retirement finances to seek expert advice:
Understanding what money you have for your retirement and how to spend it wisely can be hard, but that’s where preparation and speaking to an expert can help. Circumstances or priorities may change, particularly if you’re retiring amidst a global pandemic, but it will be much easier to adapt a plan you already have than if you were to have to start from scratch.