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Two-fifths of adults under 35 plan to retire just after 61

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Just under two-fifths (38%) of adults under 35 are planning to retire just after the age of 61, Royal London has found.

Despite many workers starting to save into a pension earlier due to auto enrolment the mutual life, pensions and investment company has dubbed this a “mismatch between expectations and reality”.

An early retirement must bring into consideration the amount needed to fund a much longer retirement, however, 73% of under 35s said they have not worked out how much they need to live on when they retire.

One challenge Royal London noted was that by retiring by age 61, an individual must build up a pension pot to sustain a retirement of potentially up to three decades. This could even result in the individual spending more years in retirement than in work.

Royal London said: “At a time when individual responsibility for funding retirement is greater than it has ever been, it’s important to plan and set savings goals to be realistic about when you retire and how much is required to sustain your desired lifestyle.”

Research from the Pensions and Lifetime Savings Association (PLSA) stated that, roughly speaking, a single person will need £13,000 a year to achieve the minimum living standard, £23,000 a year for moderate, and £37,000 a year for a comfortable standard of living, excluding housing costs.

Royal London research also found that those under 35 years of age predict they will need £1,086 per month in retirement, which would mostly be covered by the State Pension, which is currently £886 a month.

Those aged 35–49 plan to retire at age 64 and expect a monthly pension pot of £1,295 and those aged 50 – 69 at 65.4 with a monthly pension pot of £1,292.

Royal London pensions expert Clare Moffat said: “Being so far away from retirement, the younger generation have an optimistic view of when they’ll be able to give up work but there is a significant gap between expectations and retirement reality.

“Two-fifths of younger adults do not plan to work beyond 60 years of age, even though they won’t qualify for a State Pension until much later, and that poses serious questions about how they will fund the type of lifestyle they want to enjoy when they’re older.

“While the thought of early retirement may be appealing, it also comes with a note of caution as it can carry significant risk. The more of your pension pot you take earlier in your retirement, the less there’s left to maintain lifestyle in later years.

“However, savers in their 20s and 30s have a couple of significant advantages on their side – time and compounding of their investments, which potentially enables small amounts of money to grow into larger sums over time.

“Early planning and setting realistic timescales and rates of pension saving is key, that way savings will accumulate earlier, building wealth over a longer period of time, and giving ambitious retirement goals a better chance of being met.”

Royal London spoke to 4,000 adults in the UK to carry out this research.

Source: Darius McQuaid – www.moneymarketing.co.uk

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