Young high earners in Britain face similar problems to the rest of the country with regards to retirement planning.
It would seem that there’s a substantial difference between retirement expectancy and retirement reality amongst the country’s wealthier young workers, which could leave them unable to enjoy the lifestyle they desire during their ‘golden’ years.
A recent survey shows that people aged between 25 and 34 anticipate an average income of £54,300 to be sufficient during retirement, and that they required pension savings of £357,500 to do so. However, the reality is they will need a considerably larger pension pot – of over £1m – to generate the desired retirement income.
The good news for those surveyed – younger adults – can use the advantage of time to grow their pension pot over the years, but it’s crucial that they start saving and planning for retirement sooner rather than later.
Of the audience questioned, over half of their savings are in cash deposits, so in order to secure their sought-after retirement, they will need to make their money work harder for them. This is especially important with the younger generation, as they are more likely to tolerate more investment risk and volatility than perhaps people 20 years older.
However, the majority of young people surveyed claimed saving for holidays and even ‘rainy days’ took precedence over a long-term saving strategy, pushing retirement planning to the bottom end of the priority list. The belief that putting off saving for retirement to later on in your career, when perhaps your salary will be higher, is often preferable. Although the possibility of having a mortgage and supporting a family commitments could mean considerably less disposable income later on.
The importance of saving for retirement…
Following a 73 per cent rise in the number of centenarians in the UK over the past 10 years, retirement savings are going to continue to have to last much longer than allprevious generations. More and more people are spending a third of their lifetime in retirement, so putting as much money aside as possible is paramount, particularly as rising living costs, taxation and low interest rates are eroding funds.
It is imperative that people of all income brackets consider saving for retirement a top priority. Another survey carried out last year showed that the number one financial regret even amongst a sample of millionaire clients from all over the globe was not having put enough money aside for their retirement years.
Failure to save for your mature years could mean the need to work well past retirement age and having to compromise on your desired lifestyle in old age, which is most unappealing for the majority of people.
It is therefore vital that people remain on track with their retirement plans, be realistic and take control of personal finances.
Blog published by Mike Coady.