If you’re passionate about travel, you’ll likely have a bucket list as long as your arm. It’s difficult to tick them all off when you’re confined to your annual holiday entitlement at work, but once you’re retired, the world is your oyster – or is it?
Personal pension and stocks and shares ISAs provider, True Potential Investor conducts a quarterly Tackling The Savings Gap Consumer Savings and Debt Data report. Findings from the Q3 2016 edition have shown a significant split in retirement expectations in different age groups.
For a number of years, a round-the-world trip has been the retirement dream for many – and it seems that 25-34-year-olds are keeping this dream alive. A quarter of 25-34-year-olds said they would use their 25% tax-free pension lump sum on a round-the-world trip. Just 2% of over 55s said the same.
Is this the result of a more realistic outlook for over 55s? While 25-34-year-olds are hopeful about their pension potential, over 55s are closer to retirement and are more aware of the various expenses they’ll need to pay later in life, such as joining a senior assisted living community, paying for medical and final expenses, and therefore the limitations of their pension pot.
By retirement, the average 55-year-old has amassed a retirement fund of 51,446, with 12,900 accessible tax-free. This amount is dwarfed by the actual cost of a round-the-world trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around 48,000 – nearly the entirety of an average 55-year-old’s pension pot.
So how far could they travel on the cruise with their 12,900 budget? They could afford to travel halfway across the South Pacific, cutting their 120-day trip to just 35 days. This is based on a single traveler; throw a partner into the mix and the trip would take them from Panama Canal to California.
Round-the-world trips are a huge expense, so how do regular holidays compare? Just 10% of over 55s said they were going to take regular holidays once retired, while 34% of 25-34-year-olds said the same.
True Potential Investor suggests that this shift in the long-anticipated travel dream is due to a growing realism amongst pension savers. Nowadays, most people who are retiring do not want to spend their time alone or live under the expenses of their children. They are more independent. They either tend to prefer staying alone, travelling, or exploring assisted living options. And, for all these requirements, their pension can contribute in a huge way. The survey suggests that people are only becoming aware of the reality of their pension pots when it’s too late, which should motivate young people to start setting money aside sooner, no matter how small the amount.
While retirement plans may be changing, it seems that the importance of contributing towards a pension is finally setting in. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their pension pots, down from 26% in the previous quarter. With this figure expected to grow, future retirees may not need to give up on their travel dreams.
Are you interested in finding out how much you’ll possibly need in your own personal pension pot, for your retirement? If so, take the interactive quiz on True Potential Investor’s website, answering some questions about your current expenditure and future plans.