The last year has had a significant impact on personal finance for many.
While a lot of focus has been placed on financial concerns those of working age, with news outlets regularly reporting the latest unemployment figures and the effect this is having on the economy, funding for retirees is also an area that is causing worry. According to a study carried out last summer, Covid-19 could create a generation entering retirement without enough money to support themselves.
These predictions tally with the number of soon-to-be retirees who are currently worried about running out of money after they leave the workplace. In a report published by the Equity Release Council and equity specialists Key, the number of homeowners aged 55+ who are worried about running out of money in retirement has jumped to over a third (34%). This is up from just over a quarter (27%) the year before.
Why is retirement funding confidence reduced?
This sharp increase in those aged 55+ experiencing worries about their finances in retirement could be the result of several factors.
One of these is likely the result of the pandemic. According to the report, almost a third (29%) of working women and 21% of men aged 55+ expect to have a less comfortable retirement than their parents because of the UK’s economic decline triggered by the coronavirus.
The pandemic is also responsible for health concerns. Almost half (48%) of older homeowners are worried about finding the funds for care should they fall ill and just under a quarter (24%) are worried about having to sell their home. Again, there’s a discrepancy between women and men here, with 26% of women thinking about this compared with 21% of men.
Are these worries necessary?
Concerns among the unretired demographic outstrip those who are already retired. Almost half of the unretired women asked (48%) say they’re worried about running out of money in retirement. This is over double the number of retired women (23%) who have these concerns. This trend is echoed in the men asked, with 41% of unretired versus 21% of retired men having these money worries.
On the one hand, the pandemic may not be impacting on those who are already retired in the same way as it is on those who are still working but looking to retire. However, the difference in these numbers can also help to make the 55+ demographic feel hopeful about their finances after they leave work.
“While retirement is generally viewed as something to look forward to – an opportunity to take a well-deserved break after a busy working life – this report suggests that for many people stopping work is a scary prospect fraught with financial concerns,” said Will Hale, CEO at Key.
“All these concerns and more are being exacerbated by the impact of the current pandemic which has seen older consumers lose their jobs, stop saving and dip into the funds they have already set aside.”
However, will adds that those who are looking to retire in the next decade still have time to take a holistic look at their finances for retirement and to make sure that they are using their assets in the best way possible.
For example, soon-to-be retirees have time to look at their options and downsize to a smaller property, potentially freeing up cash that could go towards retirement. Similarly, there may be opportunities to take some tax-free cash out by using equity release to free up money if the property is worth over £70,000.
While the last year has, understandably, left many feeling uncertain about their personal finances, it’s still possible to look at the options available and see where funding can be tapped into.