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Complex family structures will influence retirement planning

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Retirement has changed in recent decades, and is likely to continue changing.

New research suggests that a new group of retirees is emerging, and set to grow in their dominance over the next 15 years. These retirees, with complex family structures, will have very different retirement planning needs from today’s cohort of retirees.

The findings, within a report from insurer Canada Life called Complex Families, Complex Finances, look at a group of retirees with a family situation which complicates their financial needs and planning. This emerging group of retirees currently represent around a third of retirees, but look set to become the largest group of retirees by 2035.

Growth in this group of retirees with complicated family structures is driven by several factors, including the trend towards getting married or divorced in later life, but also paying for the cost of care. Shifts in lifestyles are prompting a significant change in how we plan for retirement, but also how we live during our retirement years. It seems likely that retirement planning advice will need to change to cater for these new retirees.

The research identified increasingly complex family demands on finances as a core characteristic of this group, impacting their retirement savings in different ways. Rising rates of divorce among the over-40s means there are more single-person households within this group of retirees. The typical cost of a divorce comes in at £15,000 covering legal fees and lifestyle changes.

Single person households spend at least 5% more of their disposable income on essential bills and basic expenditure compared to couples, and spend 12% more if they are renting or still have a mortgage in retirement.

The research found that millennials today will spend an average of £53,000 on rent by age 30, compared to just £9,000 for the post-war baby boomer generation, which will significantly reduce the amount millennials can allocate towards their retirement.

It also discovered that first marriages are less common and more spread out through life. The average age of first marriage is 34 for men and 32 for women, which in both cases is 4 years older than it was twenty years ago.

With more women over age 40 giving birth each year than those under the age of 20, there are likely to be a growing number of complex family structures, supporting children much later in life. There’s also a significant impact from the Covid-19 pandemic, in which large numbers of younger people heading back to their family homes, which has implications for household spending and the opportunity to downsize to a smaller property.

Paul Flatters, Co-Founder and CEO of Trajectory, who carried out the research, said:

“As social norms are changing, so too is the shape of retirement. More people are now getting married and divorced later in life, boomerang children are disrupting later-life spending, and those approaching retirement are often caring for elderly parents as well.

“This all inevitably has an impact on this group’s ability to accumulate wealth – and the time they have to save for retirement – which is affecting their retirement lifestyles. As these trends accelerate, the growth of this group will too.”

Sean Christian, MD and Executive Director, Wealth Management Division of Canada Life’s Wealth Division, said:

“With this group of retirees set to grow, advisers need to be aware of how socioeconomic factors are changing the retirement landscape. As these trends continue to evolve, the advice industry must ensure it’s on the front foot and constantly considering how these complex retirement journeys will shift the type of support and guidance they offer clients, which will need to be tailored to their individual circumstances.”

Sources: Canada Life

The information contained in this blog post does not constitute advice or recommendations. You should seek independent financial advice before acting on any information on this website.

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