Apparently, we’re a muddled bunch when it comes to retirement planning!
Despite hating the term, being a Millennial myself (along with everyone else born between 1980 and 1997) I was interested to see the results of the recent “Future of Retirement” reports published by HSBC.
According to one study, we’re an incredibly optimistic group when it comes to our retirement plans. Only 10% of us expect to continue working after 65, with an average expected retirement age of 59 – that’s a whole two years younger than the current working age average of 61.
So, are we delusional then? It might seem that way. After all, we are generally expected to live longer, the State is facing increased financial pressure, and shiny defined benefit company pension schemes continue to be withdrawn and replaced by alternatives where the risk is on us, along with the onus to get saving in the first place!
On the flip-side, though, it appears that we’re not afraid of putting the graft in to try and make it happen. 68% of Millennials surveyed have already started saving for retirement, and we’re more likely than both “Generation X” (born 1966-1979) and “Baby Boomers” (born 1945-1965) to cut back on other expenses in order to put more away. We’re also quite a savvy bunch, with over half of us willing to seek advice on our finances and actively shop around to get the best deal, but is it enough?
Without some planning, that question is almost impossible to answer. Despite the vast majority of my friends currently saving into a pension, only one of my carefully selected sample group (aka those who answered my Facebook message) had any idea how much they could actually expect to receive in retirement and *spoiler alert* it wasn’t a lot. So, what can we do about it?
Top tips:
- Start saving straight away! Even if it’s just a fiver in the pot instead of a kebab after your night out, every little really does help, and compounded growth over the long term is your best friend.
- Have a back-up plan. I like to hope that there will still be a State Pension of some kind by the time I make it to retirement, but I accept that I might be well into my 70s by the time it kicks in! Would you be willing to work a bit longer to be more financially secure? Or do something on the side? If not, think again about if you’re willing to put more away now.
- Check what you’re investing in. Most company schemes have a default fund, but check that it’s right for you. Higher risk is often considered better for long term growth, but be aware of what you can afford to lose. There’s no point in chasing high returns if you will be crippled financially if it doesn’t pan out that way. On the other end of the spectrum, make sure it isn’t just sat in cash either!
And finally….
- Do some financial planning! Now, I hate to keep banging the drum, but there’s a reason that many people seek out proper financial advice for the first time when they’re thinking about retiring. It’s complicated stuff, with ongoing legislation changes meaning that it can be almost impossible to know where you stand without help. You might feel that a financial plan is unnecessary at this point in your life, but would you rather have some guidance now than find out at 50 that you’re nowhere near where you hoped you would be?
To help you make a start with your planning, Magenta has put together a Millennial Tool Kit including several free resources that we hope will give you a helping hand in the early years.
If you would like to talk about anything in more detail then please give us a call on 01656 760 670 and we will be happy to help!