Retirement alert: Could you run out of cash? Britons expecting inheritance issued warning

Expert reveals tips on how to save for retirement

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Retirement can be expensive, and with a lack of salary or wages, Britons will have to make do on the amount they have put aside. However, a study has found many are relying on external sources of income to fund their later life goals. Research by abrdn showed a quarter of those asked plan to prop up their retirement funds with an inheritance from a loved one.

A third have said they will need to downsize their homes to free up some cash.

With an estimated 12.5million people over the age of 65 in the UK, this equates to some three million retirees reliant on inheritance, and four million having to purchase smaller homes.

There are implications for those who are thinking about this financial path, however.

For example, those relying on an inheritance could see some of the sum swallowed up by inheritance tax (IHT) currently charged at 40 percent.

Downsizing could present another challenge, as individuals could be forced to move to a different area to find affordable property.

In abrdn’s study, a large number of retirees also stated they were fearful of running out of money in retirement.

Of those, almost three in ten have considered part-time work to help, with eight percent tempted to return to the workforce full time. 

Colin Dyer, Client Director at abrdn Financial Planning, said: “With retirement lasting 30 years or more for many, it’s vital that people are confident that they have the funds to support them. 

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“You may have income from a number of different sources, so you need to think about how best to take it in retirement.

“This is why preparation is key and taking financial advice from an expert adviser can be helpful. 

“They can assess your income streams, any tax implications such as inheritance tax if money from a loved one is being relied on and, perhaps most importantly, explore how best to make your money last throughout your retirement years.”

The study also asked current retirees to estimate their annual spend.

It showed the average monthly outgoing of a UK retiree sets them back £1,370, equating to £16,440 a year.

On average, retirees are putting away five percent of their retirement savings to cover later life care costs.

However, they are prepared to spend much more on holidays, leisure and hobbies.

While these endeavours are all important, abrdn has also warned that a failure to put enough aside for essentials could be devastating.

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Care costs can be particularly expensive, and these should be majorly factored in when it comes to retirement planning. 

Mr Dyer concluded: “Being aware of how much you will need throughout retirement and how this could change as the years go on is vital. 

“We see a lot of our customers wanting to enjoy the earlier years in their retirement to the fullest – travelling the world, paying off their mortgage and treating themselves to their retirement wishlist. 

“However, we also encourage them to keep in mind the potential longer-term costs that they could need to factor in down the line, including things like care and private medical bills.”

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