We're constantly being reminded of the importance of building up retirement savings from as early as possible, but it looks like the message doesn't always get through. In fact, according to research from Halifax, savers are leaving it until their mid-50s before they boost their savings pot, with those aged 55-64 having an average balance of just £13,516.
This figure might be 46% above the average savings pot of £9,228, but considering that those in their mid-50s are close to retirement, it's a worryingly low amount. This age should be the time when people are thinking about how to spend their retirement savings and, ideally, they should have enough to provide a usable sum of money in their golden years.
The figures show that the younger generations have an even lower level of savings. Typically, those aged between 25 and 44 have an average balance of £2,700-£4,000 – a third of the national average – highlighting the pressure a lot of younger savers are under and the difficulty in building up a sizeable pot.
Not only do younger savers have a lack of working years behind them, but many younger people – especially younger families and those trying to get on the housing ladder – face a higher level of essential spending than other age groups.
It's only after reaching their mid-40s that savers feel able to start boosting their balances, after which their typical pot grows by 89% to reach the average sum of £13,516 by the time they reach 64 years of age. This is a significant increase in such a short space of time, and while it's great news that older people realise the importance of being prepared for the future, it can't be denied that it would make more financial sense to start saving earlier.
Compound interest is the key reason for saving from as early as possible. Not only will you get interest on the amount you set aside, but you'll get interest on the interest – and it's this that could see your savings pot quickly mount up.
Richard Fearon, head of Halifax Savings, commented on the findings: "This latest research highlights a stark difference in savings between younger savers and those nearing retirement. Whilst we would expect to see balances grow as people get older, the dramatic rise in the last 10 years before retirement indicates that many savers are leaving it too late to boost their retirement income.
"We know that younger families can find it hard to set aside any spare cash with many outgoings already putting a strain on their finances, but saving regularly, whether it is for a specific short-term goal, or more long-term, should always be a priority."
The message is clear – start saving from as early as you can! The importance of having a proper nest egg can never be underestimated, and the sooner you start, the more you'll be able to enjoy in retirement. Even small amounts can soon add up, particularly with compound interest added into the equation, so make sure to get into the savings habit and you could have a decent pot in no time.
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