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Saving is key to financial security in later life

Saving is key to financial security in later life

Category: Retirement

Updated: 08/05/2014
First Published: 08/05/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

As you approach retirement, hopes and aspirations are likely to focus on winding down and taking more time to do what you please; but a comfortable retirement only comes with financial security.

Happily it seems that those over the age of 55 are enjoying increased wealth, with more in their pockets each month. According to Aviva's latest Real Retirement Report, the typical monthly income for over 55s is £1,373 – a healthy £151 a month more than the same time last year and as much as £258 more than in 2011.

This increased income is partly boosted by larger saving pots, with this age group stashing more money away to ensure they have enough in retirement. The average amount people have in savings and investments has reached a high of £18,632 compared to £17,750 in 2012, with 29% drawing a regular income from their savings, up from 24% last year.

However, a worrying 28% of over 55s do not have any savings whatsoever, but the amount of people who don't save anything is down to only 9%, compared to 15% in 2011.

It's lucky consumers in the over 55 age bracket are putting something away for the future as overall spending has increased, hitting an average high of £816 a month. Much of this is down to food, fuel, household costs, motoring and entertainment, all of which have increased since last year. The only outlays which have not seen a price hike are mortgage and rent costs.

Reassuringly over 55s are becoming less reliant on borrowing, with debt falling across credit cards, loans and overdrafts in 2014. In total the over 55s owe an average of £2,022, slightly higher than this time last year at £1,910, but lower than the £2,370 of 2011.

Property remains the largest asset for the majority of over 55s with 66% owning their own home outright, showing a rise of those that are mortgage-free. A further 17% own their own home but with an outstanding mortgage, averaging £57,766. The value of property is also the highest since 2011 standing at an average of £240,641 compared to £233,780 in 2011, and a marked improvement on 2013's figure of £221,778.

This rising property wealth could help explain the strong growth in the equity release industry over the last few months, according to Nigel Waterson of the Equity Release Council, with the figures revealing that there's "plenty of incentive for people to consider releasing a proportion of that housing wealth and give themselves greater access to funds in later life".

So just what are the top priorities for the over 55s in later life? Good health comes top of the list at 72%, while having enough money follows a close second with 70% prioritising this. Sitting alongside wealth is homeownership, with a further 62% of people hoping to own their property.

Family issues also come into play with 44% wanting to ensure their children can live independently and the same amount putting equal importance on living close to their family to spend time with them. Ensuring they have enough financial wealth in retirement to be able to step in to help children and grandchildren is a top priority for 42%, while 37% want to be able to leave an inheritance.

Time is also a key point in later life and having more time to do what they want is top of the over 55s list of things to enjoy in retirement (66%), while a further 45% want more time to spend on hobbies and 41% want to travel.

Clive Bolton, managing director of retirement solutions at Aviva, said: "Improved levels of income will make it easier for the over-55s to maintain the standard of living they desire. The fact that people are saving hard is hugely encouraging given the strong campaigning by the industry for people to create a better level of financial stability for them and their families in retirement. Unexpected expenses will impact less on their finances if they have a decent nest-egg.

"The cost of living is a continual worry for the over-55s who typically suffer more from increases to household bills since it makes up a bigger proportion of their outgoings. Having better incomes and more robust savings will help counteract the increases in expenditure for many and is a sign of an improving economy."

Saving is the key to security at whatever stage in life. If you have a little nest egg built up then you will have the confidence to overcome any financial problems life throws at you and perhaps you can save a little extra to treat yourself now and again, with sufficient savings helping ensure financial stability so you can achieve your retirement goals.

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