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What are your retirement expectations?

What are your retirement expectations?

Category: Retirement

Updated: 22/05/2014
First Published: 22/05/2014

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 It is now over 6 months old so the content may be out of date.

Enjoying a comfortable retirement all comes down to having enough income to meet your needs, but unfortunately it seems that a lot of people could be falling short. Many are drastically overestimating the amount they'll have in retirement and there are stark differences between men and women too, with research from Aegon finding that 9 in 10 will fall significantly short of their retirement ambitions.

In their latest UK Readiness Report, Aegon found that men anticipate an annual retirement income of £47,000 while women expect to see half that, with an average expectation of £24,000. However, it seems that women could be closer to reality than men, with women only falling short of their expected income by £12,665 – while men will on average fall short by £35,000 per year.

Unfortunately, a large proportion of those surveyed aren't heading down the right path to achieve their ambitions, which perhaps explains why so many people suffer a shortfall. Although twice as many men are on track to achieve their goals than women – 10% compared to 5% – it still means that overall, over 90% of those surveyed are set to fall short.

Lack of awareness surrounding their financial situation and what they actually need to do to achieve their goals is a key barrier, while women only contribute £175 each month to their pension compared to £328 per month for men. However, both are alarmingly under-educated when it comes to knowing how to plug their shortfall, with just 3% of women and 5% of men showing sufficient awareness.

A lack of engagement is a concern too, with 46% of women having never checked the performance of their savings compared to 36% of men. This could be a definite oversight – checking the performance of you pension and other savings will help you see whether any adjustments need to be made, making it more likely that you'll stay on track.

David Macmillan, managing director of Aegon UK, commented on the findings: "We know that most of the UK population is falling short of their retirement objectives, and the gap between men and women must be closed.

"Especially concerning is that only 3% showed an awareness of how to improve their financial position, and many aren't reviewing savings enough to be aware of the shortfall they may face. It's time for the pensions industry to lead the way in helping them find solutions and showing them that small steps can make a big difference."

Even upping your pension contributions slightly could help bring you closer to your goal, and making additional deposits into an ISA could potentially make a huge difference. All returns will be entirely tax-free, and once retirement hits, you could have built up a valuable nest egg.

Having sufficient savings and planning early enough can mean you're more likely to reach your retirement goal, and it's never too early to start. In fact, the number one financial regret of those aged 55+ (according to Standard Life) is not saving for retirement earlier, with 18% wishing they'd started saving when they were younger.

There are other options to consider as well, of course. A separate study shows that a lot of people over the age of 55 are planning on downsizing in the next few years, and many of those are doing so to help fund their retirement.

Downsizing can be a great way to release equity, and given that those aged 55+ could well have built up a lot over the years, they look to be taking advantage of it. Research from Prudential found that 38% of homeowners in that age group are planning to sell their homes at some point, with 77% of those intending to release equity through downsizing.

On average, they expect to release £85,300 through the sale, with 41% of respondents wanting to use that sum to save or invest while a further 29% would put some of that money in their pension pots. Either way, it could prove to be a great boost to their retirement income, and could mean they're able to get closer to their expectations.

"Our research shows that homeowners are thinking carefully about what to do with the even greater degree of choice provided by expected gains from the value of their home," said Vince Smith-Hughes of Prudential, adding that financial advice should be considered to help weigh up the options.

So, what are your retirement expectations? Are you on track to achieve them? A bit of forward planning and plenty of saving can help you reach your goal, bringing you closer to enjoying the retirement you want.

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