After working hard all our lives, retirement is the time to do what we really love. It could either be living an independent solace life, relying on assisted living options (see this page to learn more), or spending a peaceful life on some beach or hilly regions. However, for many, it is travelling that they wish for. Whether it’s ticking off those dream destinations on our bucket lists or a once-in-a-lifetime trip, recent research has suggested that our retirement hopes may be changing.
According to the Q3 2016 edition of Tackling The Savings Gap Consumer Savings and Debt Data, a quarterly report created by personal pension and stocks and shares ISA provider, True Potential, the over 55s are giving up on their travel dreams.
Attitudes are split across age brackets. While 25% of 25-34 year olds said they would take their 25% tax-free pension lump sum and spend it on a round-the-world trip, just 2% of over 55s said the same. Perhaps this disparity between age groups is a result of a more realistic outlook from over 55s. While 25-34 year olds are hopeful about their pension potential, over 55s are closer to retirement and are therefore more aware of the limitations of their pensions.
By the time they retire, the average 55 year old will have a pension pot worth 51,446, of which 12,900 can be accessed tax-free. The results are startling when compared to the actual cost of a round-the-world trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around 48,000 – nearly the entirety of an average 55 year old’s pension pot.
So how far could they travel with their 12,900? For that price, they could travel just halfway across the South Pacific – a 35-day trip instead of 120. This is based on a single traveller; throw a partner into the mix and the trip would take them from Panama Canal to California.
A round-the-world trip is an extravagance, so how have attitudes to holidays more generally changed? Just 10% of over 55s said they were going to take regular holidays once retired, while 34% of 25-34-year-olds said the same. The reason could be the restrictions on regular income while the expense of house and daily needs remain the same. They tend to save money by canceling travel plans, ending unnecessary expenditures, and sometimes firing a home helper. This might make them do their work by themselves. However, senior independent living communities are often built to take care of retired individuals and make their life stress-free.
It is clear that this shift in retirement plans is down to people becoming more aware of the reality of their pension pot. The survey suggests that people are only becoming aware of the reality of their pension pots when it’s too late, which should motivate young people to start setting money aside sooner, no matter how small the amount.
Young people’s attitudes towards pensions are changing, illustrating a more positive pension trend. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their pension pots, down from 26% in the previous quarter. With this figure expected to grow, future retirees may not need to give up on their travel dreams.
How much will you need in your personal pension pot for retirement? Complete the retirement quiz on True Potential Investor’s website, about your current/future expenditure to help you find out.