Most over 50s who have paid off their mortgages splash the cash they are saving on holidays, home improvements and gifts for the family rather than boosting their retirement savings.
On average, the over 50s pay off their mortgages when they are 55 years old, which gives them an average £322 a month disposable income.
Instead of saving the extra cash, three out of four spend the money, says a survey by financial firm Saga Investment Services.
The firm has crunched some numbers and suggests investing that extra cash would mean an extra £40,000 to spend in retirement.
When asked how they spend the money, 45% looked to improve their home; 40% took holidays and 27% bought a new car.
Topping up a pension
Only one in four decided to top up their pension with extra payments, and when of those who did, the average additional amount was £128 a month or 40% of the money saved from repaying the home loan.
The firm also spoke to over 50s still paying off a mortgage.
Most reported that they expected to settle their loan by the age of 62, which would give them three years to save the additional income. On average, these borrowers had an extra £428 to save when their mortgage was repaid – which is worth an extra £21,000 in retirement.
Saga Investment Services managing director Nici Audhlam-Gardner explained that diverting money that was used for repaying debts into a pension was a good plan during the run up to retirement.
Making retirement easier
“Most people regard paying off a mortgage as a significant financial achievement, so it’s not surprising they decide to spend the money they save on a few luxuries as a reward.
“This extra money also provides an opportunity to make for an easier retirement. One in three people told us that they could afford to retire earlier because they saved the extra money in a pension.
“Another 44% confided that they had a larger pension pot than expected because they saved mortgage money as well.”
Close to 1,000 homeowners aged 50 or over took part in the survey.
Let the banks manage your money…so they can blow it and you’ll be eating cat food for dinner in your cardboard box under a bridge somewhere.
But… the banks and retirement companies end up stealing your money long before you actually need it. Hidden fees, not hidden fees, shady banking practices… Never give the bank your money!