Is There A Shock In Store For Your Retirement?

New research suggests under-40s face a 148% hike in retirement living costs, while many over-45s are exposed to financial ‘shocks’ that could upset their retirement plans.

• monthly retirement expenditure to rise from £1,183 to £2,930 by 2050 (For pensioners who are not reliant on state pension)
• 42% of over-45s have not planned for financial shocks in retirement

Research by Royal London has revealed that today’s 35 year-olds need to have saved at least £666,000 by age 65 in order to secure the same standard of living as today’s pensioners. These stark figures are driven by a predicted 148% increase in retirement living costs by 2050.

The research also found that today’s 30-40 year-olds have an average (median) pension pot of £14,000. This represents a significant shortfall on the monthly income that will just cover the basic £1,715 cost of ‘essentials’ (such as transport, housing, food and energy) in 2050.

But it’s not all bad news…

Despite some of the more shocking statistics, the research also suggests the younger generation are no worse at planning for their future than those entering retirement today. Indeed, 67% of 18-40 year-olds questioned said they were saving for retirement (only slightly lower than the 68% of 65-75 year-olds who said they have a pension in place).

The younger age group also displayed an awareness of the likely shortfall they could face at retirement unless they up their pension savings. Fifty-seven percent of those in their 30s, and 51% of those aged 18-29, said they expect to work part-time after they ‘retire’ to supplement their retirement income, while 40% of under-40s predicted that the state pension will be a thing of the past by 2050.

‘Exposed generation’ risks retirement shocks

But it’s not just the younger generation who could be leaving themselves exposed in retirement. Research from MetLife has indicated that more than 40% of pension savers aged over 45 may be exposed to unwelcome financial and family surprises in retirement.

The most commonly-cited potential retirement ‘shocks’ among the over-45s included:

• Unexpected healthcare costs
• High inflation rates
• A stock market crash
• Falling house prices
• ‘Bailing out’ children

When questioned, it became clear that far from being oblivious to the risks 85% of those questioned were indeed worried about increased risks to their retirement dreams in the wake of this year’s pensions reforms.

So what can you do about it?

You can’t predict the future – but you can prepare for the unexpected. By building a personalised financial plan, and reviewing it regularly, you can take control of your future and give yourself a better chance of enjoying a happy and prosperous retirement that is able to withstand unexpected surprises.