They say life begins in your 40s, but what of your 50s? Findings of a recent study suggest that the good life may not last for long, as today’s 50 year olds face additional financial commitments that are putting their retirement savings plans on hold. The study uncovered that the average 50-year-old has annual outgoing finances of approximately £27,230 which equates to spending £8,490 more than they will be spending in twenty years’ time, at the age of 70. So how did the ripe old age of 50 become so expensive? The following points take a look at some of the biggest costs faced by those in their 50s.
According to data collected by the Office for National Statistics workers tend to reach the pinnacle of their earning power in their 40s, with wage levels peaking at £33,495 between the age of 40 and 49. This is contrasted by workers’ salaries falling to their lowest level when they are in their 50s – just at the point where spending increases will conflict with people trying to save for retirement.
This highlights how important it is to take action when your saving potential is at its highest during the early point of your working life. This will help you avoid having to use pension savings to pay off any remaining debt.
Medical advances and other factors mean life expectancy in the UK is continuing to overshoot official projections, with the anticipated life span for women increasing to 87.6 years and that of men to 85.7 years. 50 year olds can now expect to live for at least another 30 years and need to financially prepare for this by continuing to save throughout a decade when previous generations were able to enjoy their earnings.
Parents in their 50s are more than likely supporting their children through higher education, with a whopping half of parents having to pay more than £5,000 towards their child’s university costs each year. Not only are they footing the bill for university fees but in some cases paying rent for student accommodation and other maintenance costs – financially challenging and particularly tough if a family has more than one child at university at the same time.
Gone are the days when children flew the nest with ease at the age of 18. It is becoming increasingly common for those in their 20s and even 30s to return to the family home, driven by university debt, the high cost of borrowing and the difficulty to find employment. A recent study showed that 49% of 20- to 24-year-olds remain in the family home, up from 42% in 2008. As a result of this, many 50 year olds find themselves still having to shell out more for household bills, food and transport – even if their children are contributing to the household pot.
Despite decades spent working towards a life without debt, it has been revealed that around 7 million of those in their 50s are still paying off their mortgage. What once was an achievable goal of paying off your mortgage before giving up work, now seems near to impossible. Soaring house prices, longer-lasting loans and modern-day house buying trends which see many purchasing homes much later in life mean people will now be shouldering housing costs into their 50s and beyond.
With the cost of a funeral having increased by 58% in the last seven years, many people now begin to tackle this expense in their 50s by taking out a funeral plan. Some funeral plans can be paid off in monthly instalments over the course of 20 years. For many, organising the payment of their own funeral in advance will minimise financial trauma for loved ones who are left behind. However, with the average funeral plan costing around £3,600, those in their 50s see their monthly outgoings continue to swell, now covering not only living expenses but also preparations for death.