We’ve recently witnessed a positive shift in pension attitudes. Research from True Potential Investor’s Tackling The Savings Gap Q3 report shows that just 19% of 24-34 year olds didn’t contribute towards their pension — showing a reduction of 7% on Q2’s 26%.
However, while more young people are preparing for their retirement, it seems many of us are putting our retirement dreams on hold. The report found that while a quarter of 25-34 year olds plan to spend their 25% tax-free lump-sum on a round-the-world trip, just 2% of over 55s said they’d do the same.
Clearly, young people and those close to retirement age have very different attitudes to their retirement savings. It could be argued that this is because over 55s have a more realistic view of their savings and the potential it offers.
As the ISA investor provider’s report found, the average 55 year-old has a £51,446 pension pot by the time they reach retirement, delivering £12,900 tax-free. If they were to use this tax-free sum to purchase a trip, they’d only travel halfway across the South Pacific — shortening the round-the-world trip to just 30 days. This is just for a single passenger — for a couple, the trip would be even shorter.
In fact, the cost of a 120-day world cruise from Miami to Miami costs roughly £48,000* — which is not only more than three times the tax-free sum, but almost the entirety of the total £51,446 pension pot. Perhaps it is this realisation that their existing retirement fund simply won’t stretch to meet our travel hopes.
We’ve also witnessed a change in attitudes to holidays in general. The survey found that just 10% of over 55s planned to take regular holidays once they retired, while more than triple the number of 25-34 year olds (34%) said the same.
So what can we learn from this? The findings underline the importance of starting your pension pot early, in order to generate enough funds to help us achieve our retirement goals — whether it’s travelling the world or simply living comfortably.
* Based on brochure price of a 120-day cruise with Oceania, staying in an ‘Ocean View’ room
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