While recent high inflation, the cost-of-living crisis and economic volatility have put real pressure on many people’s finances, research from NextWealth’s Managing Lifetime Wealth report, sponsored by Aegon, reveals a deeper concern among retirement clients: the fear of outliving their savings.
The research, conducted among 200 financial advisers, pinpoints financial security as the primary focus for retirees, overshadowing aspirations for leisure and lifestyle changes.
Financial fears top the list of concerns
- 71% of advisers reported the number one retirement worry amongst clients is outliving their money.
- Inflation/cost-of-living follows closely at 64%, and 49% of advisers cited covering long-term care costsas another client concern.
These concerns are further underscored by the recent PLSA Retirement Living Standards1, which reported a substantial increase in the amount needed for a moderate retirement over the past year.
Chart 1: Concerns raised most often by retirement clients
Source: NextWealth: Managing Lifetime Wealth Report, January 2024
Fear the worst, plan for the best
While concerns about long-term financial security linger, advisers report that clients’ desires for retirement remain grounded. The findings uncover that clients aspire to maintain the familiar comfort and financial freedom they earned during their working years:
- 76% of advisers reported clients hope to maintain the same standard of living in retirement as before retirement.
- 65% of advisers found clients expressed a desire to assist the next generation (children/grandchildren) with financial commitments.
- 45% of advisers found clients wished to travel or live overseas.
Chart 2: Aspirations raised most often by retirement clients
Source: NextWealth: Managing Lifetime Wealth Report, January 2024
Steven Cameron, Pensions Director at Aegon, said: “While the prospect of living longer brings many benefits, this research shows there are many challenges that come with navigating and making the most of your retirement years.
“71% of advisers say that clients are concerned about running out of money before they die, which raises real issues about the adequacy of current savings behaviours, as well as highlighting the value of advice at and through retirement, including if drawing a flexible income.
“Worries about high inflation and the cost-of-living crisis also feature high on the list, with advisers finding that 64% of retirement clients raise concerns due to the current economic climate.
“It’s not surprising that worries over the cost of long-term care features as a top three concern for retirement clients. These findings highlight how important it is for Government to provide more certainty over social care funding, so advisers can help their clients to plan ahead.
“While concerns linger, the report also paints a picture of aspirations for retirement. 76% of advisers said that their clients hope to maintain the same standard of living in retirement as before retirement. 65% of advisers noted that clients wish to assist their next generations with financial commitments, while 45% said that clients plan to travel and/or live overseas.
“These findings reinforce the research we’ve conducted on how living longer has impacted the retirement landscape. Those approaching or in their ‘Second 50’3 are bearing more of their own financial risks. This means that personalised financial planning based on an understanding of clients’ hopes and fears is crucial for tailoring strategies that meet individual needs and provide peace of mind.”
