Instead of taking saving for retirement seriously, younger workers cross their fingers and hope for the best. Bad move!
The majority of young workers in the UK have made no plans to prepare for retirement. That's according to research from post-retirement specialist Tomorrow (formerly GE Life and National Mutual) which found that most young adults and twentysomethings have very unrealistic ideas when it comes to planning for retirement.
In March, Tomorrow interviewed two thousand British adults to discover their attitudes to life after work. It found that close to two in five adults (39%) aged between eighteen and twenty-four plan to worry about how to fund their retirement 'nearer the time'. A further one in five (20%) people in this age group hopes to support themselves after work by someday inheriting money from family. In other words, nearly three in five young people (59%) have no current plans to save for retirement. D'oh!
Furthermore, Tomorrow's survey also found that many older people wish they'd been less laid-back and casual when it came to planning ahead for post-work life. The retirement specialists found that almost three in ten adults (27%) aged over fifty-five worry that their pension funds are so skimpy that they are unlikely to be able to support themselves after retiring.
To put it another way, 4.5 million of the 16.7 million UK residents who are aged 55+ expect to find themselves short of cash when they stop work. As a result, almost two in ten people (18%) in this group feel that they have no choice but to work part-time in retirement. A further quarter (25%) says that they will probably need to release equity from their homes as a means of supporting themselves financially during retirement.
Frankly, banking on an inheritance to sort out your finances is almost always a bone-headed idea. For example, back in 2003, I was interviewed by one member of a prominent media dynasty. This person made excuses for his/her lack of budgeting, saving and investing by arguing that, one day, s/he stood to inherit substantial family wealth. Four years down the line, there are no signs of this windfall arriving so far, so perhaps those relatives are SKIing: Spending the Kids' Inheritance!
As the old expression goes, "If you fail to plan, you plan to fail" -- and nowhere is this saying more appropriate than in the field of retirement planning. When it comes to preparing for old age, I would urge young people to have a SESH -- and I don't mean a drinking session! SESH is my acronym for the simplest advice in financial planning: Start Early and Save Hard.
By the way, your final retirement income is likely to be made up of a mixture of pensions from three different sources: the government, your employers and your own private arrangements. However, you cannot rely on the first two groups to feather your nest in your later years, so it's down to you to do the donkey work and make adequate preparations for retirement.
To find out how to get your retirement planning off on the right foot, read our four-part guide:
1. You Can Retire On Less Than You Think
2. The Menace Of Inflation On Your Pension
3. Work Out What Pension Pot You Need
Finally, don't delay: start planning for a brighter future today!
More: Visit The Fool's Retirement and Pensions centre.