For many people, retirement represents freedom. The freedom, after decades of work, to choose when to get out of bed, how to spend your day, and to explore new interests.
Yet, while some of today’s retirees are lucky enough to enjoy just such a lifestyle, future generations may not be so lucky. For a growing number of people, retirement is likely to be marked by financial strain as they are caught between supporting their own kids and caring for ageing parents. This increasingly applies to those in their 40s, 50s and early 60s – a group often referred to as the ‘sandwich generation’.
Supporting an adult child or ageing parent may come at the expense of your original retirement plans. And with finances pulled in different directions, the amount you will be able to eventually pass on could be significantly impacted. Indeed, today’s working population is expecting to leave much less of their retirement pot to family members compared with the current crop of retirees.
According to research by St James’s Place, those with £50,000 or more in household assets who are not yet retired expect to pass on £74,000 as an inheritance – a third of their savings. This is down from the £125,000 those already retired expect to pass on.1
A quarter of future retirees expect to be financially supporting family members, up from 7% currently. Everyday living costs, school or university fees, and childcare topped reasons why people expect to be supporting loved ones in retirement.
Young adults may return home to live with their parents, or require financial and emotional support. Elderly parents may move in with their children, or need help to move into assisted living. Either way, obligations placed on the sandwich generation demand considerable time and money.
“Passing wealth on to our loved ones is one of the final acts of kindness we are able to make, so it is concerning that the amount many believe they will be able to pass on is eroding,” says Claire Trott, Head of Pensions Strategy at St. James’s Place.
“Building sufficient funds for your future whilst supporting other generations can seem a daunting task and it’s unsurprising that one in five people say they either feel ‘pressurised’ or ‘worried’ by having to provide financial support to others. We see consistently the value of advice in navigating this complexity and our research found that 8 in 10 people who receive ongoing face-to-face advice believe they have sufficient funds to fulfil their retirement plans. This compares with only 35% who don’t receive advice. It’s clear advice has an important role to play in ensuring a comfortable and confident financial future.”
With the added pressures of managing your own career, as well as the need to contribute to your own retirement, you may be faced with significant financial and emotional stress. However, putting in place the right plans at an early stage will allow greater opportunity to build wealth over time and leave behind as much as possible when you’re gone. Proactive planning will also help reduce your financial stress if you are already support offspring and parents, or if you think you may be faced with this balancing act in the future.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
1 Opinium Research carried out an online survey of 4,000 UK adults aged 18+ from 18 to 24 April 2019.