New research has revealed that an astonishing 3.9 million over-55s plan to downsize their home as they head to retirement.

The study, from Prudential, showed that nearly half (47%) of over-55s plan to move to a smaller property in years to come. The main reason given was one of convenience, with many wanting a smaller garden. However, finances played a big part in the decision-making process, with:

  • 60% intending to use the money to boost their retirement income
  • 13% believing they couldn’t afford to retire unless they downsized

Those are worrying statistics, especially when downsizing usually doesn’t work.

The downsizing myth

We’ve written before about the mistaken beliefs around downsizing, and why, usually, the alternatives are better.

You can re-read that article by clicking here. The average amount of equity released through downsizing (£112,000) would only produce a monthly income of approximately £220, even if it is held in the top, monthly interest paying savings account. That’s hardly a life changing amount and seemingly, not worth the hassle of such a large upheaval.

Even one of the alternatives to downsizing, equity release, is only a partial cure, and, as all good Mother’s know, prevention beats a cure.

The prevention method

Or, engaging with a financial planner and putting in place a realistic plan to achieve your retirement goals.

It beats simply relying on house prices rising to create sufficient equity for your retirement.

The sooner before your planned retirement date you engage with a planner, the more effective the relationship will be. Of course, you could accuse us of being biased, as we are financial planners, but, there is growing evidence that working with a financial planner improves retirement incomes:

  • The International Longevity Centre, in their recent ‘The Value of Financial Advice Report’ found that those who work with a financial planner increase their assets by an average of £41,099
  • The report also found that financial advice boosted the incomes of 65 to 70-year-olds by more than £1,100 per year
  • Figures from show that people who work with a financial adviser put away, on average, an extra £98 per month towards their retirement, creating an extra £3,654 per year after they finish work; significantly more than downsizing and putting the money in to a savings account

The Unbiased survey also found that the earlier people took financial advice, the more prepared they felt for retirement.

You can see more information about the value of advice by clicking here.

Commenting on the Prudential’s report, Vince Smith-Hughes, a retirement income expert at the company, said: “It is interesting to see that these figures challenge the common theory that ‘my house is my pension’. Although we see a large proportion of those taking equity from their homes to boost their retirement incomes, most people have accepted that the main reason they need to move home in later life is for convenience.

“With the average amount of equity raised likely to be just over £100,000, and with many other demands on this cash – such as helping children, paying off debts and putting money aside to pay for care in the future – for most people the best way to fund retirement is through saving as much into a pension as early as possible in their working lives.”

We are here for you

Unless you want to leave your retirement planning to chance – and remember, you could easily be retired for 20 or even 30 years – you need a plan.

As the evidence shows, the earlier you start planning, the more prepared you will be. So why not grasp the nettle and get in touch?

We’ll spend time understanding your retirement objectives and reviewing the progress you have made so far, then put a plan in place to make sure you stay in control of your retirement, rather than leaving it to chance.

Call Jane or Ben on 0113 262 1242. We would love to hear from you.