Budget £600,000 for your Retirement

A recent article in the Telegraph outlined figures suggesting that the average pensioner will need a retirement fund in excess of twice the current state pension if they are to afford the basic, everyday expense of food, clothes and fuel. Compared to five years ago, the average pensioner’s annual expenditure is a third more than it was and those who are approaching retirement age are set to be caught between these mounting living costs and a diminishing value of the state pension.

It is now generally accepted that, without a substantial subsidiary saving to go along with your state pension, your retirement years are going to be almost unaffordable. The concept of funding your retirement with credit is also a rather daunting prospect, as is the amount of debt we carry into retirement, as our means to pay it off are severely limited. As such, we’ll be much less attractive a proposition for any prospective lenders and will therefore have to pay greater rates of interest. There’s also the rather morbid truth that lower rates but longer repayment periods won’t really work for pensioners, as time begins to become a factor. Ultimately though, you could be looking at 30 years of surviving on a pension.

Figures outlined in the article suggested that for 20 years of retirement, the average retired couple will need somewhere in the region of £600,000. This staggering amount is based on an annual household expenditure in excess of £23,000 for those aged 65 to 74 and about £15,000 for those aged 75 and over. As little as five years ago, these figures were substantially lower than they are today, at around £18,000 and £12,000. At the more expensive end of the market, a couple living in London will need to find nearer £700,000 for the same 20 year period. There are big changes in cost of living depending on the region in which you live. As a result, it’s expected that a large number of people will relocate to cheaper areas for their retirement.

A basic state pension, at a current value of £97.65 per week, amounts to £10,155 a year for a retired couple. This is a stark warning that, for the vast majority of people, the state pension is just not going to be enough to live on when you reach retirement age. On top of this, further studies suggest that people are entering retirement with an average debt of £36,000. This includes their credit card debt, secured and unsecured loans, mortgages and overdrafts.

The moral of the story seems to be to save up, supplement your state pension and pay off your debts before you reach retirement. All three are far easier said than done, particularly in the current financial climate. It’s important to get help and advice from a debt specialist who’ll be able to help assist you in settling your outstanding debt in an affordable and timely manner. Get in touch with one of the dedicated debt specialists at Harrington Brooks for more information on how you can achieve this goal of a debt free retirement.