Is Saving in Retirement a Realistic Aim?
For most people the idea of saving in retirement is not a realistic aim as recent surveys have shown that up to 45 per cent of the retired population are struggling to live on the pension payments that they receive.
A number of people are also feeling the repercussions of taking the benefit of a tax free cash lump sum when they retired. Taking this option has left people struggling to cope on the reduced payments it has left them with. It is only now that the government are making a number of changes to the State Pension age, that people are starting to realise just how important it is to start saving for retirement as early as possible.
Downsizing to Save in Retirement
For those lucky enough to have purchased property early on there is always an option of downsizing when they have retired. This can help in a number of ways as it can release equity that has been built since the property was built and by downsizing household bills can also be reduced. However people should take into consideration the fact that all property prices will have risen since they made their purchase, meaning that much of the equity will end up being used if they decide to purchase a smaller property. This is one of the reasons that schemes which release equity in people's properties have become increasingly popular.
Equity Release Schemes
Equity release schemes have grown over the last decade, as people find themselves in a position whereby they need to release money from their homes in order to have the lifestyle they wanted when they retired. These schemes are one of the main ways to release a large amount of money for use in retirement, and with more people struggling with the income they are receiving, they are finding this is the only way to go about receiving more money.
There are positives and negatives associated with using a plan such as this, but much of the time when the money is needed, the positives outweigh the negatives. The positives are that this type of loan can be taken to pay a monthly income and there are a number of different options to choose from. The negatives can also become positives, depending on how much the estate is worth. If the estate was liable for inheritance tax upon the owner's death, then by taking a home equity loan then it may bring the value to under the tax limit. This leaves loved ones with less inheritance due to the amount owed on the loan, but ensures that the home-owner can live out a comfortable retirement.
Working Past State Pension Age
For some people the only option they are left with is to carry on working past the State Pension age. This enables them to save up some money and pay more into their pension, while putting off claiming their state pension. By not claiming the State Pension they are eligible for higher payments when they do start claiming, as long as they meet certain criteria. They may also have the choice of taking a lump sum payment after putting their State Pension off for a year, and this is usually equivalent to what they would have received over the year had they been claiming it, plus interest.
Overall, saving in retirement is unlikely, but can be achieved through a number of lifestyle changes. I can be a good idea where possible, as for some life only truly begins in retirement.
Our panel of FCA Approved Pension Experts Will Help You:
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- Release Cash From Your Pension
- Discover The Benefits of Changing Pension Providers