UK retirees over 50 years old are less prepared than their younger counterparts for unexpected retirement events, according to an independent study conducted by Barnett Waddingham.
The Report, in which more than half the respondents are older than 50, found that financial readiness of employees does not match retirement expectations.
Only 16 percent of those over 50 have included the possibility of serious illness into their retirement plans compared to 25% of savers below 50. While 43 percent of older investors admit that they have considered health issues, but not included them in their plans, and 32 percent say that they haven’t even thought about them.
Only 14 percent (out of a total of 50,000) of those over 50 have planned for the possibility of needing to enter care. This compares to 22 percent amongst those under 50. More than a third of older savers (35%) haven’t considered care costs when planning their finances, despite care homes costing an average of approximately PS60,000 per year in England and Wales.
The Changes in Relationship Status and Marital Status are Often Overlooked
A lack of preparation in terms of finances is also revealed by the report. Only 18% of married couples have prepared for the possibility of widowhood. 40% are considering it, but fail to prepare, and 31% do not think about it.
Just 7 percent of older savers account for divorces or relationship breakdowns in their financial plans, while 16 percent of younger ones do. Over a third of older workers (37%) haven’t considered the financial impact of divorce and separation.
Only 16 percent of parents older than 50 have made provisions for their children’s possible need for urgent financial assistance during retirement. Only 30 percent of those under 50 have taken such measures.
Planning for parents who need financial assistance is also on the rise. Only 7 percent of those over 50 have this included in their retirement plan, compared with 20 percent of those under 50 – though the fact that many older people no longer have living relatives is probably a factor. Over half of respondents aged over 50 say that they don’t need to think about financial support for parents.
Mark Futcher said that poor planning was almost as bad as saving nothing. Both can leave retirees high and dry in later life. We’re in danger of losing a generation of retirees due to insufficient planning, myopic attitudes to harsh financial realities, and a refusal or inability of asking for help. It is not too late to prevent this crisis, but it is important to act now.
Plan Your Retirement with a Self-Conscious Approach
Barnett Waddingham attributes these shortcomings to an ego-centric approach to retirement planning. Nearly a third of British employees who were surveyed prioritise income and expenditure when planning for retirement. Older savers are slightly more relationship-focused, with 39 percent considering the finances of themselves and their partner, compared to 32 percent of under-50s.
Only 20 percent of those over 50 consider their children and extended family in their financial plans. This compares to 32 percent for younger savers. Planning priorities are also influenced by demographics, such as ethnicity, gender and parenthood. Parents are more likely to take into account the needs of their extended family (29 percent as opposed to 18 percent). Women are more likely to consider family than men (28 percent vs. 22 percent).
Black workers are more likely than white employees to take a family-oriented view. 46 percent of them consider their family’s financial requirements, compared to only 23 percent of the white employees.
Futcher said, “The industry must engage and educate the public, particularly those over 50 years old. Not only should they be taught the importance of financial planning, but also given the tools and knowledge to succeed. Pension providers are most often the first to provide advice for those over 50, so they must be sure to offer comprehensive, clear, and targeted help.
