Retirement is traditionally seen as a time to sit back, relax, and enjoy the rewards of your lifetime of hard work. Whether you want to travel the world, master your hobbies, or even just spend more time with your loved ones, this chapter of your life can be hugely rewarding.
Of course, one issue that many people worry about is the prospect of running out of money in retirement. This is certainly an understandable concern, as it could mean that you might have to settle for a less comfortable lifestyle than you want.
According to a recent report by Key Later Life Finance, more than one-third of newly retired Brits still provide financial support to loved ones. While this is very generous, doing so could seriously affect your lifestyle in retirement.
To find out more about how this could impact on your progress towards your life goals, read on.
Supporting younger relatives financially can help them to grow their wealth faster
As you’ll know, when it comes to finance, young people can have a lot on their plate these days. Not only can they have sizeable university fees to repay but the booming housing market can sometimes make it difficult for them to take their first step onto the property ladder.
According to data from the Office for National Statistics (ONS), the average UK home cost £277,000 in February 2022. Even with just a 5% deposit, which would be an average of £13,850, this can be tricky even for the thriftiest saver when you factor in the cost of food, utility bills, and rent!
As such, if you have loved ones then you might be tempted to lend them a helping hand.
Pay for the cost of their education
Paying off some, or even all, a loved ones’ student loans can be a useful way to give them a financial boost. It can be easier for them to build up their wealth when they don’t have as much debt hanging over their heads.
Offer to help with the cost of a mortgage deposit
If your loved ones are saving up for a mortgage deposit, making a contribution can help them to reach their savings goal more quickly.
Let them live at home while they save up
Allowing loved ones to live with you can help them to save money on rent and utilities while they get ready to fly the nest.
Whatever way you’re supporting younger members of your family, the costs could affect your own financial security.
The Key research found that, on average, newly retired people helping out family members gave £307 a month – nearly £3,700 a year. 1 in 10 gave more than £500 a month to family members.
Care costs for your parents could add up
Of course, it may not just be your younger relatives who need financial support – you may have to consider the cost of care for your parents too. While you may want to look after them as much as you can, they may eventually need professional help.
Typically, the cost of care depends on two main factors: the type of support your loved ones may need and where in the country they live.
According to data from the non-profit organisation Paying for Care, the average annual charge for a residential care home in 2020 was £34,994, rising to £48,700 for people who needed nursing care too.
The area of the country that you live in could also affect how much you may need to set aside for the cost of care for loved ones. Paying for Care’s cost of care calculator can be a useful tool for seeing this.
For this example, let’s assume that your loved one needs residential care and has enough wealth that they won’t be eligible for council support. Here in Bristol, this would cost you £38,116 a year on average. This is a sizeable sum of money and could quickly add up over the course of a few years.
Seeking professional advice can help you to factor in these costs when building a plan
While helping family members in these ways is very generous, and will certainly be appreciated, doing so could cost you a significant amount. Consequently, if you spend too much helping your loved ones, you may not have enough left to enjoy the retirement you want.
If you want to be able to reach your life goals and support your family members, this is where seeking professional advice can really benefit you.
Working with an expert can help you to factor in these potential costs when building a long-term plan. This can give you greater peace of mind that you’ll be on track to enjoy the retirement you want while still being able to offer a helping hand to your loved ones.
Supporting your family can be hugely rewarding but it’s important to ensure that your generosity doesn’t put your own financial wellbeing on the line. Working with a planner can give you a sense of confidence that you’ll be able to help those close to you and still enjoy a comfortable retirement.
Get in touch
If you want to know more about how working with a planner can help you to reach your long-term goals, please get in touch. Email email@example.com or call us on 01454 416653.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.