For most of us, we work hard all our life in hope of a happy, and comfortable retirement, doing the things we never had time for whilst working. A big holiday in a Luxury resort Miami, spending more time with your loved ones or simply putting your feet up – our retirement dreams differ. But are pension pressures and debt demands changing what we’re dreaming of?
In a recent survey by pension provider, True Potential Investor, findings show a significant split between retirement expectations in different age groups. For a number of years, a round-the-world trip has been the retirement dream for many – and it seems that 25-34-year-olds are keeping this dream alive.
When you reach the age of 55, you are entitled to take 25% of your pension pot as tax-free cash. In Q3 2016, 25% of 25-34-year-olds said they would like to spend their 25% tax-free pension lump sum on a round-the-world trip. However, just 2% of over 55s said the same. Perhaps this disparity between age groups is a result of a more realistic outlook from over 55s. While 25-34-year-olds are hopeful about their pension potential, over 55s are closer to retirement and are therefore more aware of other expenses they might incur such as paying for an assisted living facility (visit this website for more details) or relatable healthcare needs.
According to the research, the average 55-year-old has a private pension pot worth 51,446, meaning they would receive a tax-free lump sum of around 12,900 – an amount that is dwarfed by the actual cost of a round-the-world trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around 48,000 – nearly the entirety of an average 55 year old’s pension savings.
In reality, the tax-free lump sum wouldn’t cover a round-the-world trip. In fact, it is likely to only cover the cost of a trip halfway across the South Pacific, cutting their 120-day trip to just 35 days. This is based on a single traveler; throw a partner into the mix and the trip would take them from Panama Canal to California.
The research also revealed that attitudes towards general holidays is changing. It’s not just round-the-world trips that over 55s are realizing are out of their reach. Just 10% of over 55s said they were going to take regular holidays once retired, while 34% of 25-34-year-olds said the same.
But what is the reason behind this change in attitudes? The private pension providers suggest it is down to growing realism amongst pension savers. The survey suggests that people are only becoming aware of the reality of their pension pots when it’s too late, which should motivate young people to start contributing to their pension pot sooner, no matter how small the amount.
Young people should also consider other means to fund their retirement. They could look to buy bitcoin with Independent Reserve, buy real estate, or put money into lifetime ISAs to increase their savings. They could also ask their employer about any workplace pension schemes or retirement accounts they offer.
Thankfully, the younger generation are wisening up. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their pension pots, down from 26% in the previous quarter. With this figure expected to grow, and more 24-34 year olds expected to contribute more to their pensions, hopefully future retirees may not need to give up on their travel dreams.
Why not take True Potential Investor’s quiz today to find out how much you’ll potentially need in your pension pot by the time you retire? To complete the quiz, all you need to do is answer a few questions about your current expenditure and future plans.