What will you do in unretirement as the cost of living crisis drives more older people back to work?
Table of contents
- One-In-Three Thinking Of Return To Work
- Why People Unretire
- How To Plan Retirement
- How Much Retirement Cash Do You Need?
- When Can You Retire?
- Unretirement FAQ
- Related Information
More people over 50 are working or looking for a job since the start of the COVID pandemic, says the latest employment data from the Office for National Statistics.
Fear of not having enough money to fund a comfortable retirement is fuelling the exodus back to work.
The data shows 116,000 people aged 50 or over had a job or were seeking work in the past 12 months. More than half – 66,000 – were men over 65 years old, while 37,000 were women aged over 65.
Researchers confirmed the ‘great unretirement’ is a flood of over 65s returning to work after taking retirement rather than people already in work deciding to stay in their posts for longer.
One-In-Three Thinking Of Return To Work
The ONS asked 12,000 people aged between 50 and 70 years old who were not looking for a job if they might seek work in the future. A third of 50 to 64-year-olds and one in 10 of those aged over 65 agreed they would.
Separate research by Rest Less, an online community for the over 50s, confirmed the findings. A poll of 500 retired members found that 32 per cent had returned to work or would consider doing so.
Many welcomed the idea of returning to work for several reasons, including:
- 32 per cent wanted more mental and social stimulation
- 12 per cent were struggling financially due to the rising cost of living
- 8 per cent wanted to top up their pension cash
Nearly half (47 per cent) said any return to work was for a mix of these reasons.
In another survey by an online retirement living portal Lottie points toward a recent 200 per cent increase in Google searches for ‘returning to work after retirement’ and 85 per cent for ‘retirement planning’.
Why People Unretire
Lottie’s head of retirement Nick Jones explained that although money was one attraction of unretirement, people had lots of other reasons for returning to work.
He said: “Sometimes the reasons for returning to work from retirement can be positive.
“People are living longer, and after the coronavirus pandemic, many older workers unretire because of the many health and wellbeing benefits.
“From workplace outings to staying connected, work can boost your socialisation and keep you staying connected, which is hugely important in later life.”
One matter most experts agree on is the need for a retirement plan.
Suddenly stopping work after years of routine is a shock to the system for many people.
Flexi-retirement by reducing the hours spent working can soften the blow and ease people into retirement gradually instead of pushing them off a cliff. A bonus is flexi-retirement also offers a chance to save more.
Flexi-retirement is also an opportunity to work on fitness so older people can remain active later in life.
Unretirement is not only a movement in the UK. In the US, the level of workers who retired during the pandemic who have returned to work is running at 3.2 per cent, says job site Indeed.
How To Plan Retirement
Most retirement planning revolves around how much money someone needs and where to get the cash.
Firstly, work out how much retirement income you are likely to have from pensions, savings and investments. To help, pension and other investment providers issue annual statements and the government will forecast the state pension payments.
Online calculators will give some indication of how much pension income you should expect.
Next, track your spending before you retire. Few people have the same or more money once they retire, but many have less debt and save on commuting costs.
Now there is much more flexibility in withdrawing money from a pension, you need to consider when to start drawing on a pension. Resist the temptation to draw money to keep in the bank – it’s not a tax efficient way to manage savings.
Taking too much money when you are relatively young could see your retirement savings diminish.
Advice and guidance is available.
You can take paid-for advice from a financial advisor, or free guidance frpm the government’s Moneyhelper and PensionWise services.
How Much Retirement Cash Do You Need?
There’s a big difference between how much money you need to live on and how much money you would like.
Consumer magazine Which? asked thousands of older singles and couples what they spent. The response was an average £2,333 a month – that worked out as £2,340 a month , or a shade over £28,000 a year for couples.
That, says the magazine, is enough cash to offer a comfortable retirement , but not enough for long-haul holidays or a new car every five years.
The bottom line covering basic spending was £19,000 a year, while a luxury lifestyle would cost nearer £45,000 a year.
The annual income figure includes the state pension of £9,627 a year for each partner.
When Can You Retire?
Anyone can retire whenever they wish – the better question is when can I afford to retire?
Obviously, the younger someone retires, the more money they need to support their lifestyle.
Money is locked in a pension until the retirement saver reaches 55 years old. This limit is due to rise to 57 in 2028.
The state pension age is 66 – again rising to 68 by 2046 for those born after April 1977.
Longevity is the other factor to consider alongside these life milestones. Life expectancy in the UK for men aged 65 is 18.5 years and 21 years for women., suggesting men live until 83 years odl and women until they are 86.
To make sense of the numbers, a couple aged 65 today can expect to live 18.5 years together, while the women is likely to live an extra 2.5 years on top of that.
To live a comfortable lifestyle, they need £28,000 a year for 18.5 years, which is £518,000. The good news is £356,199 comes from the state pension, leaving the couple to find an extra £161,801 to find from other income.
The numbers are worked out at today’s levels with no adjustment for inflation, which will reduce spending power.
Don’t forget staggered pension ages
Mostcouples plan their pensions as such without considering they will have different pension dates. For example, if you need £28,000 a year to live on and one of you is aged 66 and the other 60, the eldest gets theur state pension this year, but the other has to wait five years with the obvious impact on income.
Do I get the state pension as an expat?
Yes, British expats can collect a UK state pension while living abroad, but the amount may reduced depending on where you live. Some countries have reciprocal agreements with the UK over paying benefits, but the majority of countries outside Europe do not. In those places, the state pension is frozen for life at the level of the first payment.
Do the same age limits for drawing pension cash apply to QROPS?
Yes. QROPS are offshore pensions for expats that run on similar rules to a UK SIPP pension, including the broader age limits of drawing benefits, like not drawing pension cash before the age of 55.
Can I start a pension in my 50s?
Yes, you can start a pension in your 50s. Pension are tax-effective ways to save whatever your age.
I have several pension – can I combine them?
Yes. The process is called pension consolidation, which is combining two or more pensions into one. Expats can consolidate their pensions into a QROPS.
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