1. Lack of savings
More than one in four over 50s have no money set aside for their retirement, and up to a third of us are not making any provision for retirement outside of the basic government pension, despite the fact that this currently runs at less than 50 per cent of the minimum wage . This gives us little room to pay out for unexpected events – should we experience them, and reinforces the fact that we can no longer sit back and wait to see what happens.
2. Changes in family make-up
Economic pressures are causing a change in family make-up. In the past people could happily support themselves independently. Nowadays, growing unemployment, higher living costs and rising property prices make it hard for young adults to break financial ties with their older relatives, instead they are becoming increasingly reliant on them to finance life milestones such as buying a house or paying off student debt. Some retirees may have to dig into their retirement reserves to fund these unanticipated demands.
3. Health care worries
Financial planning has moved beyond simply ensuring we have enough income to cover our living expenses in retirement. As generations live longer, the risk of health issues during the latter part of our lives is increasing. Although this is a well-known concern, new research from Prudential shows just one person in five retiring this year has made provisions for ill-health in retirement .
This might be due to the fact that many of us are unaware of the real cost of long-term care and therefore not building it into our planning. The Chartered Insurance Institute says that four in five people have no idea of how much they will have to pay for care, while 50 per cent think long-term care is free . As people are living longer but not planning for it, many are increasingly vulnerable to worrying levels of financial stress in the event that they suffer an unforeseen problem such as a prolonged bout of ill-health or critical condition. If people don’t have sufficient savings to fall back on in the event of an unforeseen problem, they need to protect themselves in some other way.
With continued savings pressures and an increasing number of dependencies to support, making financial provision for the possibility of ill-health in retirement should be an integral part of the retirement planning process. For those who are worried that their plans might leave them vulnerable, life insurance or a specific critical illness cover is a reassuringly simple way of providing protection. Equally, it’s important to take time to reflect on the financial pressures that surround us and consider what actions need to be taken in order to live comfortably in retirement.
1 Yahoo (May, 2012), “Millions of over-50s to retire on half the minimum wage” [online]. Available from www.uk.finance.yahoo.com
2 Yahoo (September, 2011) “Britons ‘clueless’ on the cost of long-term care” [online]. Available from www.uk.finance.yahoo.com
Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial advisor about your own circumstances.