FUTURE pensioners risk underestimating how much they need for retirement by more than £68,000 over the course of their golden years, according to new research.
This is the equivalent of being £400 out of pocket each month as a staggering one in three (33 percent) middle-aged savers think they can live on their state pension alone, Nationwide Building Society found. The shortfall could prove to be a major setback for tomorrow’s retirees, who will be enjoying a greater life expectancy, by forcing them to shelve plans to move abroad to sunnier climates, downsize their home or support their children and grandchildren. The Nationwide research, which polled more than 1,000 people aged 40 to 60, showed just four in 10 (40 percent) people in middle age have a private pension in place. On average, those surveyed said they expect their monthly shortfall in retirement to reach an average of £208.
This equates to £37,440 when taking into consideration the current retirement age and average life expectancy.
However, the reality is that their shortfall could be around twice as high, with the poll highlighting that the average retiree receives £505 a month in state pension but requires £885 a month to live on.
This includes £616 for essential bills and £269 discretionary spending.
For those without an additional pension to take them beyond the basic state allowance, this leaves a shortfall of £380 a month, or £4,560 a year.
In an average 15-year retirement the shortfall would amount to £68,400, well over twice the average £27,000 annual salary.
Jason Hurwood, Nationwide’s director of Home Propositions, said: “We are living longer and need more money to keep us going.
“The reality is that without adequate income, and potentially living a third of our lives in retirement, older people risk missing out at a time in life when they want to relax and enjoy themselves.
“As an industry we really need to do more to help people access their money in later life and it is something we are continuing to explore.
“Options should be varied; we can’t presume releasing equity in the home is the solution for all older people with limited income, despite healthy average levels of equity.
“There needs to be more education and support so that people can take charge of their own futures and pick the option that is right for them and their circumstances.
“Recalibrating the relationship between our money, our expectations and our assets is key to unlocking a retirement that is comfortable.”
When Express.co.uk asked Kay Ingram, director of policy at financial planners LEBC, last year, she advised savers put away a percentage of salary equal to half your current age if you want to have half your salary paid as a pension by your mid-60s.
So, a 20-year-old needs to save 10 percent a year, whereas someone starting to save at 50 would need to put aside 25 percent of earnings on a regular basis.
Her most crucial piece of advice was the sooner you start saving for retirement, the less you need to pay in each month.
Source: 25.03.2019 LEVI WINCHESTER – Express
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