New research reveals what over 50s do with their cash once they've paid off their mortgage.
So, you’ve finally paid off your mortgage. Do you splurge on a holiday or put it into your pension?
For most of us, mortgage payments or rent take up a huge chunk of our monthly income, but many over 50s have paid off their mortgage which leaves them with plenty of extra cash each month.
What do they do with it?
New research has found that we’re splashing that money around: spending on holidays, home improvements and gifts for the children top of our priorities rather than setting aside extra money for our retirement.
Over 50s who own their home outright reported that not having to make mortgage repayments left them £322 better off each month. The research by Saga Investment Services found that half of people put some of that extra cash into a savings account, while 45% paid for home improvements, 40% spent the money on holidays and 27% bought a new car.
“Repaying a mortgage is one of life’s biggest financial achievements, and it’s understandable that people want to enjoy the income boost that they’re finally getting after decades of repayments,” says Nici Audhlam-Gardiner, managing director of Saga Investment Services. “But this often comes when there’s limited time to build up as big a nest-egg as possible for retirement.”
Using that money to boost your pension could make a huge difference to when you retire and how large your retirement income is.
Pensions are a low priority
Only 23% of people put the extra money they had each month after paying off their mortgage into their pension. Even those that do only set aside 40% of the additional money for retirement.
Of those surveyed the average retirement age was 62, with the mortgage paid off at 55. That means a seven-year period of increased pension saving. If you put all the extra cash into your pension you could save an extra £40,000 thanks to the generous tax relief on pension contributions.
“In our survey, a third of people said they were able to retire earlier than planned because they’d made the effort to put their extra income into their pension, while 44% said they have ended up with a higher retirement income than they originally expected,” says Audhlam-Gardiner.
“Making the most of your finances in the run up to retirement is vital to ensure you have a comfortable life once work is over.”
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