A lot of people are uncertain about their future, with many leaving retirement planning too late. Here are a few facts about it that you may not have known.
- More People Than You Think Have Little Saved
One in seven people retiring this year have no workplace or personal pension. Relying solely on the new flat-rate state pension will lead to an income of £159.55 a week. The Joseph Rowntree Foundation sets the weekly income benchmark for an acceptable standard of living at £186.77. Therefore, relying solely on the state pension dramatically undercuts that level by £1,404 a year.
- Healthcare Costs Are Astronomical
Research by Fidelity has shown that a retired couple can expect to spend an estimated £184,000 on healthcare in retirement. This value has been increasing steadily over the years and can drastically reduce savings. The primary factor for this has been the increasing life expectancy.
- Your Actual Life Expectancy
In the UK, the current life expectancy is 79.4 years for men, and 83.1 years for women. However, men currently aged 65 have a 78% chance of living for another 10 years, and woman have a chance of 85%. This is because at an elder age, you have passed a lot of diseases that are most commonly found in early life. You are therefore expected to live longer than the countries average age.
- Compounding Student Debt
The average student debt after university is currently around £25,000. Research has shown that someone with this level of debt, can expect to have £243,000 less in retirement savings. This is more than what you can expect to spend on your retirement healthcare bill.
- Investment Returns
In the first quarter of 2016, there was a small downturn in the market. Research by Fidelity showed that the average 401(k) balance fell to $87,300 from $91,800 at the same time in the previous year. Markets will always face small downturns like this due to short-term volatility. It is therefore important to treat investment as a multi-decade process.
- Your Retirement Date May Be Unexpected
55% of retirees retired earlier than expected, with health reasons cited as the number one cause. It is therefore not advised to rely on working longer to make up for a lack of savings. Not everyone is able to pull a Warren Buffett and work well into their 80’s. Ensure that you have a thorough financial plan in place to accommodate for all scenarios.