Over-55s not factoring inflation into retirement planning, study finds

Around just two out of five (37%) over-55s have planned for the impact of inflation on their personal finances when they stop work, new research from Key Later Life Finance has indicated.

With Consumer Price Inflation hitting a 30-year high of 7%, Key’s study suggested that many over-55s who are either approaching retirement or already retired are facing an “inflation shock” as they try to manage their retirement income.

The equity release adviser’s research also found that 41% of over-55s admitted they had not planned for inflation or did not know whether they had, while the other 22% said they have not planned their retirement income at all.

Key’s research was based on responses from 1,000 UK adults over the age of 55 and indicated that the current discussions around inflation have impacted the UK’s approach to retirement. The findings showed that 43% of those who are working full-time are planning to factor this challenge in – which is up from 39% of those who have already retired.

Furthermore, the study suggested that the current economic situation is also encouraging a more thoughtful approach to retirement with only 15% of the employed confessing to a lack of retirement planning, compared to 23% of those who are already retired.

CEO at Key Later Life Finance, Will Hale, commented: “Retirement planning can be complex at the best of times so it is easy to understand how some people can find it daunting to take into account factors like inflation.

“However, with most people feeling the pinch at the moment, it clearly illustrates just how important it is to consider the impact of inflation on your future retirement income and take proactive steps to manage this.”

Among those who did say they have planned for the impact of inflation on their retirement spending power, more than a third (34%) said they can rely on the state pension keeping pace with rising prices, while 33% believe their company pension will rise in line with inflation.

As well as looking to the state pension and company pensions, 30% of those who have prepared for inflation also said they have anticipated the need for their income to rise each year and have approached their savings accordingly.

Hale added: “The importance of future proofing your finances is clearly moving up the agenda and when you compare retirees with those over-55s who are still working, you can see that the recent inflation shock has encourage people to plan more carefully. No one wants to find that as they age, they need to cut back more and more just to make ends meet.

“While saving as much as possible for retirement and careful planning is clearly important, it is also vital to consider all your assets and to explore different options – whether it is accessing your housing equity, boosting your tax-free savings or downsizing.”

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