personal finance

Millennials and Gen Z expect to retire at 59 on £26K salary – but just one fifth on track


Six in ten 20-40-year-olds hope to have at least the same standard of living as their parents – but four in ten fear they may not be able to retire when they want to

Nearly four in ten young adults fear they may not be able to retire when they want to
Nearly four in ten young adults fear they may not be able to retire when they want to

Gen Z and millennials expect to retire at 59 with an annual income of nearly £26,000 – but just one in five is on track to meet their target, according to research.

A study of 2,000 adults aged 20-40 found 61 percent expect to have the same – or better – standard of living as their parents when they retire.

But while 52 percent have set financial goals to keep them focused on saving for the future, just 22 percent are expecting to hit their target.

Instead, a third (33 percent) are focused on saving for a house deposit, while 28 percent are building a cash buffer for unexpected expenses.

Others are putting their spare cash towards a wedding (12 percent), starting a family (17 percent) or a one-off event such as a holiday or new car (24 percent).








Three in ten adults say it “scares” them to even think about retirement
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Image:

In Pictures Ltd./Getty Images)



The study, by saving and investing app Moneybox, also found 87 percent are concerned about saving for their retirement, but 49 percent feel they can’t afford to at the moment.

As a result, only 35 percent are contributing to a workplace pension, with just 11 percent maxing out their payments – and only 21 percent are saving outside such a scheme.

Meanwhile 12 percent have chosen to invest in “higher risk” trading options such as crypto.





Ben Stanway, co-founder of Moneybox, said: “It is clear from our research that many young adults are beginning to realise how much they will need to save to be able to enjoy a comfortable retirement.

“The challenge they face is significant, especially when you consider changing external factors such as the rising state pension age and the fact that many are currently using most of their income to fund their day to day lives and to save for shorter-term goals, such as buying a house, getting married or starting a family.

“For many, there is little left to go towards something like their retirement.

“While at times it can be difficult to see past our more immediate financial needs and goals, we hope to help everyone get on the right track towards securing a retirement they can look forward to.

“To do this, we need to change the perception that retirement is something you only need to think about in mid-life, to being something you actively plan for alongside your short, mid, and long term financial goals.”

The study found more than half (52 percent) of those polled have considered the annual income they would like to have when they retire.








The earlier you start saving for your future, the better
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Image:

Lewis Mulatero/Getty Images)



Of those, 42 percent have done so as they are concerned about their standard of living in retirement, while 40 percent want to be able to retire comfortably as soon as they are able to.

But 38 percent fear they may not be able to retire when they want to.

Of those who have not considered their retirement income, 44 percent said it feels like an impossible task while 36 percent simply don’t know where to start.

Nearly a third (31 percent) went as far as to say it “scares” them to even think about it.

It also emerged that just 37 percent feel they have been taught the importance of saving for retirement.

Ben Stanway, from Moneybox, added: “It is clear there is a lot of confusion and even anxiety around this topic and this is something we are committed to helping address.

“The lack of financial education provided during our school years has resulted in many being unclear on the actions they should be taking in their 20s and 30s to maximise their retirement savings, but there are some simple and cost-effective steps that everyone should consider now to help get more clarity on how to plan for life after work.”

MONEYBOX’S TOP FIVE TIPS TO HELP YOU TAKE CONTROL OF YOUR RETIREMENT SAVINGS:

  1. Set a goal to help you stay focused
    A great first step is to think about the annual income you would like to have when you retire. A good benchmark could be two-thirds of your current annual salary, assuming that by retirement age you’ll likely have reduced some outgoings such as commuting costs, any mortgages, and childcare costs, but want to enjoy a similar standard of living as you have now. It’s a good idea to keep reviewing this figure as your salary changes throughout your working life and you get closer to understanding what your retirement outgoings will be. Now that you have a better idea of what your ideal retirement looks like, it will be easier to stay focused on building up your pension pot and the income sources that you will need to realise i
  2. Track down your old workplace pensions
    On average, it’s estimated that millennials will have 12 different jobs during their working life, and so it can be a lot of work to keep track of all your old workplace pensions. The free Moneybox Pension Provider Search Tool can help you track down your old workplace pension providers. Their team of Pension Detectives will do all the heavy lifting and even help you consolidate old pots into one simple personal pension, so you’ll have full control and visibility over where all your pension savings are invested.
  3. Make the most of free money available
    If you currently have a workplace pension, it’s important to find out if your employer offers more than the minimum three percent contribution and, if so, how to maximise those employer contributions. While this might mean you have to slightly increase your own monthly pension contributions, the additional top-up to your pension could make a big difference to the value of your pot over time. The sooner you do this, the longer your investment will have to grow over time. Also, don’t forget that you don’t have to pay tax on the contributions you make into a pension.
  4. Clarify your state pension entitlement
    Of those surveyed, 70 percent had no idea how much they were on track to receive from their State pension. If this sounds like you, don’t worry, it’s easier than you think. Just sign up/log into your personal tax account on GOV.UK HMRC website and you can quickly find out how much you’re on track to receive. Remember, this is dependent on your National Insurance contributions and how many years you have been working, so can be different for everyone.
  5. Start NOW and enjoy the benefits of compounding
    It really can’t be overstated, the earlier you start saving and investing for your future, the better. Why? Because of compound interest. £100 a month invested from the age of 25 could be worth £130k+ by the time you retire. However, if you were to start later and invest £200 a month from the age of 45, you would only be likely to have £76k by the time you retire, assuming the same rate of return. Considering the possible returns on your investments, no matter how little you might be able to contribute now, will really help when weighing up shorter-term goals vs. longer-term financial planning.


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