According to new research, retired people in their sixties should be striving to keep around £16,000 to £50,000 in emergency funds.
This can help to cover three years of essential living costs following hypothetical financial shocks, and to offset exposure of investment assets to market volatility. These figures will vary according to what pension provisions are in place, how much extra can be afforded and what is deemed ‘essential’.
A further survey of 55- to 85-year-olds found that 20% of those questioned routinely spend more than they expected to in retirement, while a further 11% found this to be an initial problem in the early years of retirement, before outgoings stabilised.
Pensions expert Becky O’Connor said that overspending in later life occurred when people were unsure how much to spend on core expenditure such as family, food, housing and travel.
Emergency cash funds are likely to be withdrawn from easy access accounts or ISAs, taking away from pre-retirement savings. Caution is advised when accessing tax-free cash, particularly from pots of defined contribution pensions earned via years of employment, and defined benefit pensions. Personal finance expert Sarah Coles urges people to have a clear plan for the future when entering retirement, so as not to waste money, and to assess which assets are liable for inheritance tax, to consider the likely impact on any pension income.
If you are currently retirement planning in Cheshire, contact Hartey Wealth Management to discuss intelligent personal finance strategies to secure your future.
