The over 50s approaching retirement are falling on hard financial times facing a rapid drop in income and paying down debt from their pensions.
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The golden age of final salary pensions has passed, and many over 50s have lost ground in saving for their later years as the credit crisis and high inflation knocked back savings income in recent years.
Many expect to retire on an income of almost a quarter less than minimum wage after a lifetime of working, according to pensions firm LV=.
At current rates, the minimum wage pays £13,124 a year, and the financial firm reckons many over 50s will only pick up 75% of that amount – which works out to £9,843 a year or £189 a week.
The result is many over 50s are staving off retirement as long as possible to maintain an income to pay for their lifestyle and day-to-day living costs rather than to boost their retirement savings with extra cash.
Retiring with debts
The research found 85% of workers aged between 60 and 69 will retire later than they had planned.
Debt is also a growing problem for the over 50s moving towards retirement.
On retirement, one in eight people (12%) have credit cards in the red, 7% still have a mortgage to repay and 5% are overdrawn at the bank.
The worry is that if they cannot manage their money while picking up a salary, how will they pay their debts and living costs when they drop off the retirement salary cliff and have to live off much less money coming in than they were used to.
Richard Rowney, the firm’s life and pensions managing director, said: “People approaching retirement are under huge financial pressure. They face a longer retirement because people are living longer and this is stretching their available money over a longer time.
“It’s important to make the right financial choices as early as possible to give options and more income in retirement.”
Recent changes that mean pension money is available to drawdown and spend rather than invest in a poor paying annuity may help – providing those drawing on pensions make the right financial decisions with their cash.
“Paying down bills or splashing out cash on unnecessary luxuries will eventually lead to financial problems down the line as retirement money runs out because it cannot be replaced from earnings,” said Rowney.
“It’s important to get professional financial advice before touching pension cash.”
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