After decades of hard work, many people look forward to their retirement and the freedom that comes with it. Your time is yours to spend as you like – from learning a musical instrument and volunteering at a local charity to visiting the theatre and enjoying holidays in the sun.
To find out if the golden years of life really are found in retirement, we recently commissioned some research into how people’s lifestyles and spending habits change over their lifetimes. We also spoke to three of our financial planners to see if their conversations with clients told the same story. The findings might surprise you. Read on to find out more, or visit our interactive infographic for a more detailed look at the research.
Perhaps it’s no surprise that people are optimistic about their quality of life ahead of their retirement. This could be down to the new freedom that retirement gives you, or the simple fact that there are no more commutes or early Monday morning starts. Whatever the reason, we found that 84% of people expected their lifestyle to stay the same or improve.
The good news is that these expectations usually turn out to be true. Three times as many people said they have seen their lifestyle improve rather than deteriorate since retiring.
Financial planner Graham Dixon, from our South Coast office in Bournemouth sees his clients’ quality of life improve dramatically after retirement, often for the same reasons:
“With no more work to worry about, they can spend their time seeing their grandchildren grow up while also enjoying holidays in the sun.”
Our research backs this up. The three most common reasons for an improved lifestyle after retiring were:
Younger people may think that they have more fun than older groups – but our research says otherwise. One quarter of the household budget is spent on having fun for those aged 65-74, compared to just one fifth for the under 30s.
And it’s not just West End shows and museum exhibitions either, according to Bruce Dodd, financial planner from our London office:
“I’ve got a client who retired from the oil business and then bought llamas. He moved up north and did llama walking holiday tours! Another client bought a camper wagon and drives across Europe once a year to see where he ends up.”
Younger people may think that they have more fun than older groups – but our research says otherwise.
The fun doesn’t stop there – holidays are also an important part of retirement for many. More than 40% of people in retirement see an annual holiday as an important aspiration, whether it’s soaking up the sun on the Cote d’Azur or mountain biking through the Lake District.
We found that a typical household will spend £41,000 on holidays between ages 65 and 74. This figure jumps to £74,000 for the wealthiest quarter of households.
Spending tends to dip after age 75, as the appeal of long-haul flights tends to fall and faraway locations are swapped for nearer shores. According to Bruce: “Many people will have visited the Far East and Australia already, and they may go to the United States a few more times, but gradually they start staying closer to home.”
You wouldn’t be alone if you found these figures surprising, as many tend to underestimate retirement spending. On average, people will misjudge the amount they need for their whole retirement by £100,000 – and risk sleepwalking into a frugal retirement.
But how much money will you need for retirement? We found that the average household needs £26,500 a year every year until age 75. The figure skyrockets to £43,300 for the wealthiest families. Spending tends to drop after this point, but for those that need to pay for care fees, it will be much higher.
It’s clear that retirement is one of the most enjoyable periods of life, but the money needs to be there to finance all this fun – not to mention other aspirations such as paying for a grandchild’s education.
Of the people who said their lifestyle deteriorated in retirement, 44% said it was because they didn’t have enough money to support the lifestyle they wanted. This is why proper planning is essential.
Vaughan Watson, a Managing Partner for the South East stresses the importance of planning in advance of retirement: “If we have helped a client to plan for the future, they will have a good idea what their retirement income will be. If it’s lower than they expected, they have a chance to do something about it. If they are already on track, we can discuss what else they could enjoy spending their money on now – like an extra holiday or two.”
It’s clear that retirement is one of the most enjoyable periods of life, but the money needs to be there to finance all this fun.
Our financial planners spend their days helping people turn their retirement dreams into reality – from saving enough money to taking it out in the best way. To find out how they could help you, speak to your usual Tilney contact or get in touch by calling 020 7189 2400 or emailing firstname.lastname@example.org. You can read more about the service in our Financial Planning Service guide.
Our researchers analysed data from the latest Family Spending Survey and average life expectancies from the Office for National Statistics. Additional data came from a survey of 2,007 adults aged over 45 conducted by Opinium in December 2016. You can find out more about the results in our interactive infographic.