WITH news that over-50s have increased spending on holidays by 23 per cent, should I get one of those 'I’m spending my kids inheritance’ stickers and just enjoy life?
With the 2016 we’ve had to date and what’s still to come with Brexit and the US presidential race, then it’s pretty tempting to just go on one long holiday.
And it seems like for many retired people, that is exactly what they are doing.
A recent report by CEBR on behalf of Saga, shows that over the last five years people over 50 have increased spending on travel by 23 per cent.
In 2015 the over-50s spent £39bn on travel, well over half the UK’s total holiday spend.
It seems that one of the reasons for the increase is additional disposable income people enjoy after paying off their mortgage.
A report by Saga Investment Services in June this year highlighted that over-50s who have completed their mortgage repayments are £322 better off each month.
Of those, 45 per cent paid for home improvements, 40 per cent spent it on holidays and 27 per cent bought a new car.
However, only 23 per cent of people put the extra cash into a pension, while those that did only set aside 40 per cent for retirement. If you had cleared your mortgage at 55 and paid all the extra money into a pension until retiring at 62 (average retirement age of those surveyed), then you’d have an additional £40,000 thanks to tax relief on pension contributions.
As well as the extra cash from mortgage savings, those who retired before 2011 have benefitted from the ‘triple lock’ on pensions, which means that the state pension has risen in line with average earnings, consumer price inflation or 2.5 per cent based on which of the three is the highest.
Combined with final salary pensions, which are likely to become rare in the next 10 years, then income rose for the over-60s by 11 per cent between 2008 and 2015.
So, while a portion of the population have been fully enjoying retirement, then what about Generation Y, those born between 1980 and the mid-90s?
In the last 30 years the disposable income of those aged between 25 and 29 has fallen by 2 per cent, while 65 to 69 year-olds have seen a 62 per cent rise, and 70 to 74 year-olds have enjoyed a 66 per cent increase.
In the seven years from 2008 to 2015, those under 30 saw a 7 per cent drop in income.
This means that the current generation is likely to be the first in a long time to actually earn less than their parents.
We have written a lot over the last few weeks about the slowdown and how this might impact on investment, especially after the British Chambers of Commerce predicted GDP will halve from 2.3 per cent to 1 per cent in the next year.
We have also discussed the ageing population and how the general population is expected to rise 3 per cent with the numbers aged over 65 expected to increase by 12 per cent (1.1 million) between 2015 and 2020, while the cost of care is going to rise as local Government and NHS budgets are squeezed.
And while it is important to live for today, it’s important to thinking about taking some advice and planning for tomorrow to ensure that you can enjoy your holiday memories as you get older, while knowing your children will be in a position to support you.
:: Darren McKeever (dmckeever@wwfp.net) is Northern Ireland adviser of Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. For a free, no obligation initial chat about your individual finances, call 028 6863 2692, email info@wwfp.net or click on www.wwfp.net. Follow us on Twitter: @WorldwideFP
