Baby boomers face realities of retirement costs en mass

The largest number of post-war baby boomers are now starting to reach retirement age and this year and next will see the greatest number of new retirees in history. Official figures forecast the over-65 population will double from 2010 by 2020. This increase in pensioners subsequently brings with it larger sums of retirees presented with the realities of retirement costsen mass. While some will be prepared financially for the years ahead, recent research from the Equity Release Solicitors Alliance (ERSA) indicates many are likely to will have insubstantial savings to provide themselves with the standard of living they would hope for, and will need to seek alternative assets to fund their retirement.

The ERSA research discovered the number of adults who feel they do not save enough into their pension each month has reached a staggering 73.3%. With pension pots shrinking, savings being eroded by low interest rates and inflation, many retirees are finding themselves financially stretched.

As a consequence of this mass movement into retirement recent reports have suggested around two million workers over 50 are already planning to use their home to help pay for retirement, with one in four having no other option*. Being faced with a choice between releasing equity and relocating is increasingly common, demonstrated by the recent branding of the Home is their Pension (HIPS) 'hippie' generation.

As the largest asset people commonly have, it's understandable property is seen as way to provide an additional stream of income in retirement. Furthermore, one in ten of those over 50 plan to use the money locked in their home for the children, to help buy a new house, save for a wedding or help with school fees.* This rising trend reflects the difficult economic climate in which adult children are increasingly turning back to their parents for support.

ERSA research has found equity release is becoming an increasingly popular option to access wealth accumulated in property, with 34% of people likely to consider an equity release scheme. Downsizing and relocating is an alternative, but is often undesirable to older generations with a plethora of memories and personal experiences attached to their homes. Equity release allows retirees to maintain a familiar environment, and avoid the hassle of moving, while still freeing assets.

Although less drastic than moving house, embarking on an equity release scheme requires careful consideration. Understanding equity release information and seeking equity release advice is essential. ERSA believes educating consumers on different fiscal retirement options is fundamental to achieving optimal outcomes for every case.

 

*Data from LV

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