BY JOHN ELLIS, FINANCIAL ADVISOR
As a financial adviser I often encounter individuals with differing expectations about their financial needs in retirement. They often underestimate how much money they will need and how long they expect to live in retirement.
Living longer into your 80s and 90s can significantly impact your financial needs. The State Pension and other supports, like the fuel allowance and GP Visit Card, provide some relief, but they are often not enough to cover all expenses.
Recent findings from a Royal London Ireland survey throws light on these expectations and reveal a concerning trend. Almost half of those surveyed in Ireland (45%) expect their 60s to be the years they will need the most money, while nearly four in 10 (38%) anticipate needing more money in their 70s. Only 17% believe they will need the most money in their 80s and 90s.
This survey, which polled 1,000 adults nationwide, highlights the varying perceptions of financial needs in retirement. Interestingly views shift as people get closer to retirement. For instance, just 8% of 35-44-year-olds expect their 80s to be the most expensive decade, while 19% of those over 55 feel this way.
Commenting on the findings, Mark Reilly, Pension Proposition Lead with Royal London Ireland, noted: “How much we’ll need for our retirement years could be anyone’s guess – as none of us knows for sure what lies ahead.”
While we cannot foresee the future, we can make educated guesses based on the following major costs.
Nursing Home Fees: Weekly fees can range from €1,000 to €3,000!
Mortgage Payments: Almost 27% of homeowners expect to be paying off their mortgage in retirement, which can be a substantial financial strain.
Healthcare Costs: Health insurance premiums can exceed €4,700 annually, and GP visits can cost between €45 and €70 each. More expensive treatments, such as heart surgery, can add significant costs.
Daily Living Expenses: Utilities, groceries, and other daily expenses remain constant. For instance, the average annual electricity bill for a three-bedroom house is €1,763, and the gas bill is €1,466.
Discretionary Spending: Travel, hobbies, and further education are common pursuits in retirement, each with its own costs.
Supporting Dependants: With many having children later in life, some retirees may still support their children, including helping with house deposits or education costs.
Without planning many retirees may find themselves struggling to make ends meet. This is why it is crucial to start planning early and consider all potential costs. Setting realistic financial goals and regularly reviewing and adjusting your retirement plan can make a significant difference.
Awareness is the first step towards change. By recognising the potential financial challenges of retirement, you can take proactive steps to secure your future. Consulting a financial adviser and making informed decisions about pension, savings and investments are all critical actions.
While the journey may seem daunting, “with proper planning and foresight, it is possible to navigate the financial complexities of retirement and enjoy the golden years with peace of mind”.
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