Comment by Andy James, Head of Retirement Planning, Towry:
"As I drove into work recently I heard the news that it had been confirmed that generations moving towards retirement who were born in the 60s and 70s are going to be worse off than their parents, unless they are lucky enough to inherit substantial sums from the older generation.
This news is not exactly unexpected, as it has been forecast for a good number of years that the continued increasing wealth of the next generation is unsustainable. The higher cost of property has meant that those looking to get on the property ladder are taking on greater debt and thus struggling to save. This coupled with the significant decline in final salary pension schemes means that future generations will not have the income and capital available to the post-war baby boomer generation.
Many individuals are drifting towards retirement with their eyes firmly closed; possibly hoping, in the words of Mr Micawber, that ‘something will turn up’. This something has in the past been a substantial inheritance, but with their parents and grandparents living much longer in retirement, therefore spending much more of their savings and the potential for them to also fund the large costs of care in their later life, how likely is this?
As we come to the start of another New Year and to those resolutions we all make, I think that for many in their 40s and 50s they should resolve to be in a position to answer the following questions:
¦When do I intend to retire?
¦How much will I need in income and savings to fund my retirement from that date?
¦Am I on track to achieve that level of funding?
¦If not, what should I now do to get myself on track?
Help may be required to answer those questions and the assistance of a financial planner can be invaluable in opening the eyes of those not wanting to face up to a poorer future. It is never too late to make some sensible plans and far better to understand the issues then to just hope that finances will take care of themselves.
For those reading this that are in the generation that is about to or has already retired, who are feeling happy with themselves, I would simply ask the question, how are you going to fund your retirement, pay for later life care and help your children to do the same when they get to retirement. If you haven’t looked at succession planning as yet, then perhaps it is a good time that you add this to your list of resolutions."
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