Recent research has revealed that almost one in five people (18%) in their 50s and 60s are failing to save anything towards their retirement thanks to the rising cost of living and stalling wage growth. Described as a ‘mid-life savings crisis’, it means that millions of people close to retirement age are unaware of how much they will need to pay into their pension pot in order to live comfortably once they finish working.
More than half of people in their 60s have not increased the payments they make into their pension in the final years before retirement, a figure which increases to 64% when looking at people in their 50s. Inflation in the UK has reached its highest rate in nearly six years at 3.1%, whilst the average weekly pay packet is growing at only 2.2%, making it increasingly more difficult to cover household costs and put money away for the future.
As a result of the added squeeze on their finances, one in four people said that since reaching their 50s they have been choosing to spend less money in order to put more away for when they retire. Around one in six of these people do this due to moving from full-time to part-time work or reducing their contractual hours, which has resulted in their income being reduced. One in ten people also said that they now spend more money than they did before turning 50, explaining that they like to splash out on family members including children, grandchildren and elderly parents.
For anyone over 50 finding themselves in a mid-life savings crisis, the first step is not to resign yourself to thinking that it’s too late to do anything about it. Whilst you don’t have the opportunity to grow your savings in the same way as someone at the start of their working life, starting to put money away each month, as soon as possible, is essential. Making the most of your employer’s additional contributions will also help. As employers will often match whatever you put in, contributing more of your monthly salary will mean your employer will pay in more too.
If you’re a homeowner over 50, another option to increase your pension pot is releasing some of the equity in your property through downsizing. Whilst it might be an emotionally difficult decision to move from your family home, it can be something worth exploring to provide a healthy boost to your retirement savings and ensure you can comfortably enjoy your life after work.