Most people in their 50s, 60s and 70s don’t budget formally, with one in five admitting they don’t keep tabs on their incomings and outgoings at all, according to SunLife’s Finances After 50 report.
SunLife’s Finances After 50 report studied the day-to-day finances of more than 3,000 over 50s UK households and found that just 31% of over 50s budget properly.
Half of over 50s said they don’t budget formally – 28% say while they don’t record all the incomings and outgoings, they do have a clear idea of their finances, while 23% said they only have a rough idea of what is coming in and out.
The average income for an over-50s household is £2,175 and the average outgoings (which includes all regular spending from essentials like mortgage payments, bills, food to transport and mobile phone costs insurance and regular savings and non-essentials including meals out) is £1,833, which leaves £342 ‘spare’ but 39% say they don’t have anything left once all their regular outgoings have gone.
Simon Stanney, non-life business director at SunLife said: “Our study shows that the average over 50s household should have £342 left over each month after all their regular – essential and non-essential – expenses are accounted form (see below for full list), but 39% say they have no play money left.
“It could be that for many, just taking more control of their finances could put them in a much better financial position and create a little extra ‘fun money’.
One of the dangers of not budgeting or saving enough is it can impact upon retirement plans.
Toby Band, private wealth director at The Arlo Group says: “Most people want to maintain their standard of living in retirement but without enough saved up, it can be a challenging period. Pension credit is available for those who don’t have a weekly income above £173.75 (individual) or £265.20 (couple), however, this only amounts to an extra £16 per week, so the state cannot be relied on in retirement.
“Because of this, there is a risk of starting to save too late. Most young people think retirement is so far away they don’t need to save. However, if an individual saves £300 a month from the age of 19-27, stops and achieves 8% p.a. growth, they’ll have a £878,278 pension by the retirement age of 67. If they only start saving in the 20 years before retirement, so between 47 to 67, then the pot is only £177,884.
“Additionally, pension freedoms – that allow people aged 55 or over to withdraw up to 25% of their pension tax-free – pose a significant risk to savers’ long-term retirement plans. If someone takes too much too early to support their lifestyle without a normal or expected level of employment income, this could mean their standard of living in later life suffers as a result.”