A considerable disconnect exists between the retirement aspirations of young adults and the financial realities they might face, according to recent research by mutual insurer Royal London.
The study, based on responses from 4,000 adults across the UK, indicates that a significant 38% of those under the age of 35 anticipate retiring by the age of 60.
This ambition to retire at 60 presents a disparity as the current state pension eligibility extends beyond this age. The average retirement age predicted by individuals under 35 is 61.8 years, implying an early departure from the workforce.
However, despite this ambition, only a modest 27% of those surveyed have calculated the amount of savings required to support their retirement. The financial implications of an early retirement are substantial, as individuals would need to amass funds to sustain a retirement potentially spanning three decades or more.
The study underscores the importance of pragmatic financial planning, with experts urging individuals to establish achievable savings goals that align with their desired retirement lifestyle. The Pensions and Lifetime Savings Association (PLSA) has provided indicative figures for varying living standards in retirement, ranging from £13,000 to £37,000 per year, excluding housing expenses.
Royal London’s research highlights that those under 35 anticipate needing an average of £1,086 per month during retirement. However, experts caution that this amount, mostly covered by the current state pension of £886 per month, might fall short of individuals’ needs, particularly if housing costs and inflation are not factored in.
Clare Moffat, a pensions expert at Royal London, stressed that while early retirement may be appealing, it also comes with financial risks. The research emphasises the advantage of initiating pension savings early and leveraging compounding growth over time to ensure a comfortable retirement.
The study ultimately underscores the need for more comprehensive financial education and planning among younger generations, enabling them to make informed decisions about their retirement goals and the necessary preparations to achieve them. Moffat highlighted: “The more of your pension pot you take earlier in your retirement, the less there’s left to maintain lifestyle in later years.”
