When we think of retirement, most of us dream of a time when we can finally kick back, relax and take our foot off the pedal. But for tens of thousands of Britain’s looking forward to giving up work this year, that dream looks more like a nightmare.
According to research by the Prudential, nearly one in five people will enter retirement owing an average £33,000.
It is the second year in a row that retiree debt has risen with the Class of 2018 facing a shocking 80 per increase in arrears compared to those who retired in 2016. Just two years ago, the average debt stood at £18,800.
The number is a stark contrast to actual retirement income which has only risen by £1,200 a year – to £19,900 – in the past decade.
One glimmer of hope, however, is that the proportion of people retiring in debt has fallen from 25 percent in 2017 to just 19%. However, for many of those planning to fill their workfree years with hobbies and travel, a new reality awaits.
‘It’s a worrying trend that so many people are retiring with such large debts,’ says Evolution Financial Planning Director Rebecca Robertson.
‘Although fewer people are entering their golden years owing money, those who are, face bigger debts than ever.’ Credit card bills and mortgages are the biggest source of arrears with 38 percent of retirees still paying off mortgages while 53 percent owe money on plastic. Around 18 percent have bank loans and a further 18 percent have overdrafts.
Those retiring in debt expect to take three and a half years to get back in black. Repayments will cost an average of £285 a month – that’s nearly a quarter more than those facing retirement debt in 2017 had to pay back!
It’s not surprising then that almost 15 percent of people expect to take longer to pay back the money they owe.
Fourteen percent hope to be debt free within seven years of retirement while a further six per cent worry they will never be able to pay it all back.
‘Paying back such a large chunk per month will be a stretch for many,’ says Rebecca. ‘This will create added pressure to already stretched budgets as most people face a reduced income once they stop working.’
Men expecting to retire this year also face much heftier bills than women, the research revealed.
The average debt for men is around £43,600, compared to £19,200 for women. What’s more, 22 percent of men are expected to retire in the red compared to 16 percent of women.
‘Making provision for your retirement is essential, says Rebecca. ‘In order to ensure financial security in later life, you need to start saving as soon as possible. ‘After working so hard for so long, retirement should be a time when people can finally relax and enjoy the spoils of their labour. Sadly, for thousands of Brits, that may no longer be the case.’
For independent and honest advice about money management, equity release and pensions please make an appointment to speak to one of Evolution Financial Planning’s team of friendly female financial advisors. Email firstname.lastname@example.org