For a lot of pre-retirees, thoughts of retirement will revolve around extra leisure time, hobbies, trips abroad, indulging in a few little luxuries and perhaps spending money on themselves. Usually, those thoughts won't involve providing financial support to family members – but it could be time to think again.
Research from Prudential has revealed that, far from being a time when retirees can enjoy their long-worked-for retirement income, the golden years could actually involve a lot of additional spending on family members. In fact, two in five of those planning to retire this year are helping their families financially, typically to the tune of £250 per month – or £3,000 per year.
Given that retirement incomes are already suffering thanks to paltry interest rates, poor-value annuity rates and a distinct lack of prior saving, that's a lot of extra money the average retiree has to find. That's why it's even more important to be prepared – those not yet in retirement need to focus on saving as much as possible from as early as possible, and when the time comes to consider your retirement income it's important to shop around to find the best-value annuity possible.
A decent retirement income means you'll be able to retain the lifestyle you want whilst helping out family if needs be, and as the average retiree with dependents typically supports two people – usually children or grandchildren under the age of 25, with 14% of retirees providing help with living costs and 11% giving money for luxury items – it's important to make sure your income will cover it.
This becomes even more important if you want to make sure you're able to leave an inheritance to your loved ones. Happily, out of those surveyed around 30% believe they'll be able to leave an inheritance averaging £180,000, but unfortunately 24% don't think they'll be able to leave any inheritance at all.
Stan Russell, retirement income expert at Prudential, said: "Our research shows that retirement doesn't necessarily mean an end to family financial commitments. Giving a financial helping hand to family is very important, but people retiring this year are risking their own standard of living with the levels of support they provide… [that's] why saving as much as possible, from as early as possible, and seeking professional advice, are vital for those preparing for retirement."
However, it isn't all about spending on other people. Additional research from LV= has shown that retirees actually spend almost £33,000 on luxuries during the first five years of retirement, including electronic goods, theatre trips, dining out and holidaying for an average of 20 nights per year, so it seems that despite external commitments a lot of retirees are still able to treat themselves.
And quite right too! It's meant to be a life of leisure after all, but just make sure you've got enough money to last the duration of your retirement (32% had to significantly cut down on their level of spending after the first few years, and 34% now worry that they'll run out of savings).
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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