Middle-aged professionals who have an above average income, don’t know how or when they will be able to afford to stop working
According to new research by Alliance Trust Savings, almost a third of 45 to 55-year olds with either individual incomes of £35,000 or more a year or a household income of £60,000, had clear retirement goals and financial plans in place to achieve them.
While this figure may be promising, 29% of respondents admitted they had not given thought to how they would fund their later life and a further one in eight (13%) had no idea when they would be able to stop working.
Almost three quarters of respondents stated they would have to rely on a workplace pension to fund their retirement, while one in five (22%) said they would rely on their inheritance and a further 26% admitted they or their partner would have to continue working into their retirement.
Sara Wilson, Head of Platform Proposition at Alliance Trust Savings, commented: “With much of the recent focus on younger generations and those in or at retirement, it can be easy to overlook the scale of the financial challenges facing people in their mid-life years. Those within 10 years of being able to access their pension savings are often faced with a raft of potentially complex challenges, from the cost of raising children and looking after ageing parents to dealing with divorce or the threat of redundancy. All while keeping household finances in shape and setting money aside for later in life.
When it comes to how long respondents would last with their savings and investments if they lost their main source of income, the prospects were quite bleak as a third (32%) admitted they would get into financial difficulty in three months or less. Even those who would be considered affluent with a disposable income of £750-£999 a month would run into difficulties, with a fifth (20%) saying their savings and investments would only last three months or less if they lost their main sources of income.
Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, comments; “Retirement might seem a long way off for many, but individuals really need to think about how they are going to fund their future income as early as possible. Saving more now or working longer than planned could make a real difference and the value of well thought out planning from early on should not be underestimated.”
”And it’s not just retirement which is important to save for. It’s always a good idea to have a backup plan for any possible situations where your normal source of income stops or is reduced, such as sudden illness.”
Financial education delivered in the workplace can help employees understand the basic principles of money management, including how to set budgets and manage finances, and how to build a personal savings plan – all in order to support their short, medium and long term saving goals; whether that be saving for a rainy day or to generate income at-retirement.”
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