Middle-income 60 to 74-year olds have total incomes more than 60% higher than the similar group in the mid-1990s, with earned income rising by 160% for this group as a whole, according to the latest research from the Institute of Fiscal Studies (IFS).

Employment rates for older men and women are likely to continue rising as life expectancy increases and subsequent generations have less generous pensions to rely on.

But the gap in basic benefit levels for those just below and just above the state pension age has risen from 30% to nearly 130% in the last twenty years. This may not be sustainable as the state pension age continues to rise.

Carl Emmerson, deputy director of the IFS says: “The incomes of middle income 60 to 74-year olds are now much higher than they were in the mid-1990s as private pensions and earnings have grown.

“Future generations may actually end up with lower private pensions. But there is much capacity for employment rates of older individuals to rise further: for example, employment rates of men aged 60 to 64, which have been increasing since the mid-1990s, are still well below the rates seen in the 1970s when life expectancy was much lower and health less good.”

How to plan for retirement

Victoria Hicks, director of City & Capital Acquisitions, says: “Firstly, you should think about retirement as early as possible – but don’t be disheartened, it’s never too late. Be mindful of the fact that you may need to adjust expectations, work for longer, or invest more to obtain that dream plan.

“The best place to begin is to review your state pension and go from there. With a range of valuable tax allowances available each year – and no national insurance to pay on retirement income – the future doesn’t have to seem bleak!

“Next, consider where you are now, where you want to be, and review the options to get there. Create a financial plan that is clear and uses realistic assumptions around challenges, such as inflation and investment returns – but ensure it’s adaptable, as your personal situation may change.

“If you need outside help, there are many very good advisers – working with some sophisticated planning tools – who can help build, monitor and review your plan. But, if you don’t have access to such advice, there are some helpful tools online.

“It’s important to remember that saving for retirement is not just about how much you have in your pension. It’s also about drawing from any assets you may have, and are comfortable in using, to secure a comfortable lifestyle.

“There are plenty of other ways to save for life after work alongside a traditional pension, which offers a range of very valuable tax benefits. For example, you may have a rental property, share portfolio, or cash tied up in your own home, thus making equity release a possibility.

“Many people like the accessibility of alternative savings and investment vehicles, while others prefer bricks and mortar – and some are lucky enough to diversify into all of them. Each option brings its own pros and cons, and not all are suitable for everyone.”

Source: Sabuhi Gard –adviserspointofview.com – 03.07.2019

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