Retirement isn't generally associated with splashing around mega-bucks and living the high life. However, research has revealed that plenty of people will find themselves doing just that. Around 1.7 million Brits will spend more than £1 million in their retirement years alone.
Tilney's Cost of Tomorrow Report discovered that in fact 6% of people aged over 65 will have this kind of cash, and devote it disproportionately to the finer things in life. They will spend around £410,000 on entertainment, holidays, restaurants and cars in their remaining years – this is around the same amount of money that the average retired household will spend on absolutely everything.
One key difference for this group is health and personal care. Not only are they more likely to devote resources to private medical treatment, but since their later-life care costs are means-tested, they must also fund these, should they need them, without support from the state.
Retirees don't need to be in the upper echelons of the super-wealthy to have plenty of luxuries in retirement. The researchers found that the richest 25% of retirees spend £684,000 in retirement. After the age of 65, they will spend £74,000 on holidays, £66,000 on entertainment and recreation and £42,000 eating out. They will also spend £38,000 on health and personal care and £15,000 on alcohol and tobacco.
What about your future?
It demonstrates just how much of the UK's wealth is in the hands of its retirees. The Resolution Foundation identified in 2015 that their wealth had overtaken that of the under 45s, and while younger households are dealing with the issues of shrinking wages, older people have fast-growing assets like property, and at least some of their income is guaranteed to rise with inflation - including the State Pension.
However, life isn't all sunshine and rainbows for all pensioners. While the richest quarter have an enviable lifestyle, there are still plenty of retirees who are struggling to make ends meet. Around 14% of pensioners on the UK live in poverty (on less than 70% of the average incomes) A further 1.2 million pensioners have incomes just above the poverty line, and women, single people, and older pensioners are at particular risk.
The question we all need to face is what kind of retirement we are establishing for ourselves. Most people have no idea of the answer to this question, but the dramatic gulf in the possible retirement lifestyles is a clear demonstration that it's time we all delved a little deeper to understand what retirement holds in store for us.
How we spend our pensions
How we spend our pensions
Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.
A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.
Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.
Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.
Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.
A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement
Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.
Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.
Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.
The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.
While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.
Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to Unbiased.co.uk - because while baby boomers know how to have fun - they also know how to save for the future.