The time is now to save for retirement in the sun
They call them our ‘golden years'. Golden is the colour of lager, and we look forward to Spanish sunsets on a beach in Marbella, after wild dancing, aged 65.
First we have to sort out the finances. There are many obstacles on the way to spending our years in the sun. When we are young, perhaps we tend to set our level of pension saving by how much we personally will need. It's not that simple, any more.
You may have read in this column about the ‘sandwich generation', those people, mostly in their 50s, who suddenly find themselves having to support their children, but also help their parents.
They are literally ‘sandwiched' between the two.
Aviva has just published part one of its‘Real Retirement Report' for this year, and it shows in detail just how many of us are caught out in our 50s by unexpected drains on our finances. A whole generation are suddenly realising they should have saved more into their pensions, in the earlier decades of their career.
In fact, there are 1.9 million of us in our 50s who are struggling to help both children and parents. That's one in five (19 per cent), and this is diverting funds that would otherwise have gone into our pensions, in the very years when we need to be ramping up our pension saving. At 29,000 feet, it is wise to put on a parachute, before jumping.
And as the age for the state pension gradually rising – it is expected to reach 68 by 2046 – and with our documented tendency to start a family later than we used to, plans for a reasonably early retirement have evaporated, for many.
Nearly two in five over-50s (36 per cent) now state that they will have to work longer in order to support their children, and a third (32 per cent) say that their children are the only reason they are still working.
Looking separately at those who are supporting their parents, over 1 in 10 (12 per cent) agree that they are working longer than they'd like to, in order to help mum or dad with healthcare or other financial needs. Again, the ability to save for their own retirement is diminished, if it hasn't gone out the window altogether.
It's what's called, in the industry, being ‘trapped in the workplace' - and it is on the rise.
Aviva are telling us that supporting our children severely impairs our pension saving: over a fifth of over-50s (22 per cent) have reduced their ability to save for themselves and one in ten (12 per cent) have had to give up saving for themselves completely, to support dependents, children and adults.
The head of savings and retirement at Aviva, Lindsey Rix, says that children are flying the nest later and later, and so many parents are faced with a dilemma regarding pension saving.
The retirement landscape has changed. Gone are the days when the state pension was enough; gone are the days when saving the minimum into a workplace pension was enough. These days, we need to start pumping more money into our pensions in our 20s and 30s, and let it grow, before we get side-tracked into helping our children and our parents in our 50s.
Making additional contributions is allowed. How to go about it? Just speak to your financial adviser.
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005. Further information is on the Facebook page 'Kennedy Independent Financial Advice Ltd'.