Retirement Is For Saving Not Big Spending

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Older people are not big spenders in retirement and tend to keep the cash they have saved during their lifetime to pass on to their loved ones.

New research busts some myths about those that have retired and their wealth.

Rather than spend their money fast and loose, the over 55s only draw an average 39% of their wealth before they die.

Most tend not to spend money on easing their health in retirement.

Only 7% of over 55s who died between 2002 and 2012 privately paid someone to help with their care in their final two years before death, although 20% stayed in a care or nursing home – but only 7% stayed for longer than six months and few paid for private care.

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Generation game

This suggests most wealth held by retirees is left as inheritances rather than spent in retirement, says the Institute for Fiscal Studies (IFS), the think tank that drafted the research.

The study also revealed most married people left their wealth to the surviving spouse, who then passes the asset to their children rather than missing or sharing across generations. Only 16% of surviving spouses left an inheritance for grandchildren, although 74% had them.

Housing wealth is becoming more important to the over 55s. One in seven born between 1950 and 1954 own a second home, compared with one in 10 born between 1940 and 1944 and one in 20 born a decade earlier.

Housing wealth

Rowena Crawford, an associate director at IFS and author of the report, said: “Older people do not draw on their wealth much during retirement. Most homeowners do not move or access their housing wealth, and even financial wealth is drawn down only slowly. This means that most wealth held by retired people is likely to be bequeathed to future generations, rather than spent.

“This will have implications for the level and distribution of resources among current working age individuals, particularly those with wealthy parents and few siblings.

“Given the increased freedom people now have over how they spend their pension wealth in retirement, carefully monitoring how the use of wealth evolves in future will be important, both for the living standards of the retirees themselves, and for younger generations.”

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