People are living longer, an undisputed fact that could be considered a breakthrough were it not for the serious financial consequences it has in today’s economic climate.
The latest figures from the Office for National Statistics reveals the average life expectancy for UK men and women rose again by four months to 78.2 and 82.3 years respectively in 2010. This means, as we last longer, so too must our finances.
It is increasingly likely that we will need to invest in healthcare at some point later in life, such as paying for medical or care bills. Heating and living costs are soaring with inflation and many pensioners are being forced into raising money against the value of their home through equity release; the sale of equity release plans in Q3 2011 was up 3.8% on the same period last year, according to research from Key Retirement Solutions.
There are certainly drawbacks to equity release, depending on your situation. For instance, the amount you owe can escalate with a lifetime mortgage as the interest is added to the amount you owe, essentially meaning you are paying interest on interest. Furthermore, it is not always possible to transfer a scheme to a new home if you decide to move.
Although equity release might be the most effective option available for some, enabling them to sustain a decent lifestyle in retirement, it is vital those considering it have explored all other options.
There are a number of factors which are sometimes overlooked when it comes to planning for retirement. Every single asset and outgoing should be assessed, including pension entitlements, investments, endowments and savings. Considering external factors such as inflation, interest and Base Rate should also be taken into account. Until we launched our LifePlan at RetireEasy.co.uk, there was nothing available allowing the public to analyse everything effectively in one place; there wasn’t any way of knowing
when your money would really run out and how you should react accordingly.
Many fear their liquid funds will run out before they do. Our belief is that you need to be prepared for this eventuality and recognise it as soon as possible. This will give retirees the opportunity to review their planning before it is too late. People may be surprised to learn that, by considering where and how assets can be adjusted, you can rectify potential problems in the future. For example, some people may prefer to downsize their home or sell some assets, rather than opting for equity release.
Technology and programmes like RetireEasy.co.uk can be instrumental in understanding your finances’ longevity and can also serve as a complementary tool for those who also employ an Independent Financial Advisor, to give their IFA a more thorough overview of their financial situation.
We recently carried research commissioned by OnePoll, which revealed 79% of those aged 50 to 70 worry about their financial future and one in seven worries daily. Retirement should be a time for people to do the things they enjoy and live life to the full. Comprehensive financial planning is one step to alleviating some of these worries, so you can make the most of an exciting new era in your life.
Richard Collison, RetireEasy.co.uk