Many of us look forward to retirement as a chance to do the things we love; for avid travellers, this means seeing the world and exploring those destinations that have been on our bucket lists for some time.
However, could this all be changing? In stocks & shares ISAs and personal pension provider True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016, a shift in attitudes to retirement travel is emerging.
The report found that a quarter of 25-34 year olds would use their 25% tax-free lump sum from their pension to book a round-the-world trip. However, just 2% of over 55s said the same. Perhaps this disparity between age groups is a result of a more realistic outlook from over 55s. While 25-34 year olds are hopeful about their pension potential, over 55s are closer to retirement and are therefore more aware of the limitations of their retirement funds.
So what does the average 55 year olds pension pot look like? Research has shown that by retirement, it will stand at 51,446, delivering a tax-free lump sum of around 12,900 – small fry in comparison to the actual cost of a round-the-world trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around 48,000 – nearly the entirety of an average 55 year old’s pension.
Using their 12,900 tax-free sum, in reality they could travel halfway across the South Pacific, reducing the 120-day trip to just 35 days. This is based on a single traveller; throw a partner into the mix and the trip would take them from Panama Canal to California.
Aside from round-the-world trips, how are attitudes to holidays more generally changing? Just 10% of over 55s said they were going to take regular holidays once retired. Perhaps when they have been leading their independent living lifestyle, they might have realized the true potential of travelling. Having said that, if you take the statistics of the 25-34 year olds, 34% also said the same.
Quite clearly, these changes are due to people becoming more aware of their pension potential. The survey suggests that people are only becoming aware of the reality of their pension pots when it’s too late, which should motivate young people to start contributing sooner, no matter how small the amount. This money can go towards traveling after retirement or living a luxurious life with just a side income and pension plan. There can also be other things you might want during your senior years like assisted living facility, home care, or senior living community which may require a good amount of money. So, prior planning can prove to be very beneficial later.
Moreover, changes in attitudes suggest that future retirees may not have to give up on their travel dreams. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their pension pots, down from 26% in the previous quarter. With this figure expected to grow, future retirees may not need to give up on their travel dreams.
By completing some questions about your current expenditure and future plans, in True Potential Investor’s Saving for Retirement quiz, you can learn how much you’ll potentially need in your personal pension pot for your retirement.