How confident are you about your retirement?

Hopes, fears and aspirations of people approaching and in retirement

People aged between 55 and 64 are now less confident about their retirement than they were a year ago, with over-55s most likely to be worried about rising prices.

Many of us are unsure about what to expect when it comes to planning for the future. Study after study has indicated that many of us aren’t sure whether we will be able to retire comfortably. It really does seem that it’s increasingly difficult for some to feel confident about retirement.

Retired people

New research has highlighted an interesting insight into the hopes, fears and aspirations of people approaching and in retirement[1]. How much your retirement will cost depends on your lifestyle, so it differs for everyone. That said, it may be more expensive than you’d expect. Inflation concerns have been rising since last summer and rising prices pose a problem for retired people.

The research also revealed 33% of UK adults are worried about rising prices of everyday items, up from 27% in September 2021. People aged over 55 (36%) are most likely (of all age groups) to say they are worried about the rising prices of day-to-day items.

Rising prices

Women (40%) are more anxious about rising prices than men (26%). Retirement confidence is also falling for over-55s. The proportion of people aged over 55 who are confident about retirement has fallen in the last year.

In December 2021, 41% of people aged between 55 and 64 (who weren’t yet retired) said they were confident that they have saved enough for a comfortable retirement, compared to 44% in December 2020.

Comfortable retirement

55% of over-65s (who weren’t yet retired) are confident they have saved enough for retirement, compared to 60% in December 2020. Women (35%) are much less likely than men (52%) to be confident about their retirement prospects.

However, mass affluent people – those with assets of between £100,000 and £500,000 excluding property – are much more likely to be confident about retirement. Some 71% of mass affluent consumers are confident that they have saved enough for a comfortable retirement, compared to 43% of the population as a whole.

Purchasing power 

The proportion of mass affluent consumers who are confident about retirement has also increased, from 60% in December 2020 to 71%. Previous research found that a large proportion (84%) of this group saved money during the COVID pandemic and one in five (20%) mass affluent said their household saved over £10,000. This group is more likely to have put these savings into a pension (8% vs 5% UK adults).

Those on fixed incomes will see the purchasing power of their incomes fall. Those drawing an income from their pension fund may be forced to withdraw more money from their fund than they anticipated and increase the risk of running out of funds in retirement.

Cautious investors

One likely reason why over-55s are more worried about inflation is that they typically have a larger proportion of their savings in deposit accounts that are not keeping pace with rising prices. Wealthier households are probably more confident because they tend to have a greater proportion of their investments in real assets such as equities and property, which have risen in value over the past few years.

Rising inflation poses a dilemma for cautious investors. They are generally uncomfortable with the volatility that investing in stock market-based funds can bring but are also concerned that their savings fail to keep pace with rising prices. One option for them is a fund that invests in a wide range of assets but which helps to smooth out the ups and downs of the stock market.

A financial plan that is tailored to you

Every successful financial plan starts with understanding you, your commitments, your ambitions and your aspirations. To find out more about your options for taking an income in retirement and what you need to consider, please contact us.

Source data:

[1] The LV= Wealth and Wellbeing Monitor is a quarterly survey of 4,000+ consumers which examines their attitudes to spending, saving and retirement. LV= surveyed 4,000+ nationally representative UK adults via an online omnibus conducted by Opinium in December 2021.