Downsize early to avoid running out of pension

With the average briton predicted to run out of savings over 10 years before they die, could downsizing in your 50's be the answer? Reducing the amount of your income you spend on your property early could help you boost your savings pot and enjoy a financially secure retirement.

4
minute read
Last updated:
August 25, 2020

Could early downsizing help solve Britain’s pension crisis?

Amid the opulence and excesses of the famous World EconomicForum in the swanky Swiss resort of Davos, there was a stark financial warning that affects millions of people across the globe, including us right here in the UK. Experts at the event presented sobering figures that predict that most of us will simply run out of savings long before we die. But what exactly did the report say and how can you avoid running out of cash in your later years?

What did the report say?

The report looked at a number of countries worldwide and examined whether pensions and other retirement savings were keeping pace with increases in life expectancy. What they found was shocking. In the UK, the report estimates that the savings of the average man will run out 10.3 years before they die, while the savings of the average woman will run out 12.6 years before they pass away.

What about my state pension?

Many people in Briton are relying on their state pension to top up their private pension pot, or even to look after them completely if they have no other savings, but this is a risky strategy. Firstly, the official retirement age at which you can claim your pension is rising, going up to 66 in2020, 67 by 2028 and 68 by 2046 – with suggestions that these rises may come even sooner that that. Furthermore, last year the Government’s own Actuary Department warned that with life expectancy and social care costs rising all the time, the pension system as it stands could be exhausted by 2033, requiring either significant rises in National Insurance contributions, or substantial cuts to the benefits provided.

Spend less or make more

The author of the report, Han Yik, Head of Institutional Investors at the World Economic Forum, was clear about what needs to be done. “You either spend less or you make more,” he said, suggesting that many people may need to work longer before retirement to ‘make more’ and ensure they have enough funds to last.

According to the Office for National Statistics, a man of 65in the UK has a 50% chance of reaching 87 years old, and a woman of 65 has a50% chance of living to 90. At 65, you also have around a one in ten chance of reaching 100. That means your savings need to last between 22 and 25 years at a minimum, and they could have to last you for 35 years or more.

How can early downsizing help?

For many people, simply making more is not an option, especially as they advance in years and are less fit and healthy for work and less attractive to the job market. Unless you can delay your retirement, which may not even be possible for you, making more is not as easy as it sounds.However, spending less could be a simple solution, both before and after retirement, if you downsize your home.

Many older people still live in large family homes that have large bills to go with them. These homes are expensive to heat, hard to maintain and may still have significant mortgage repayments. Yet as a couple oran older person living alone, you simply don’t need all those rooms and the financial burden that goes with them.

Downsizing before you retire can cut your costs considerably, allowing you to put more of your salary aside in savings for your retirement. Compare the running costs of a smaller home with your current property, and you’ll soon see how much more cash you could have available every month, which you could invest towards enjoying your retirement. If downsizing wipes out your mortgage too, you’ll have even more that you can save, cutting those 10.3 or 12.6 years after your savings are predicted to run out, down to a much less worrying number.

A stress free sale

Of course, selling your family home is not an easy thing todo, especially if you have spent many years there, raising your children and filling it with precious memories. The last thing you want is an endless stream of viewers trailing round finding fault and picking those memories apart for months on end while you wait for a buyer. An older home can also be costly to sell, requiring redecoration, updating and maybe even renovation to bring it up to modern standards, which can cost you thousands of pounds and lead to months of upheaval. These factors can often put people off downsizing until they are forced to do so by failing health or financial problems, meaning that they miss out on years and years of  substantially reduced living costs that could help them save for retirement.

At Yes Homebuyers, you can get a simple, stress free home sale on your terms, with the flexibility to move when it suits you and the guarantee that our offer will never change, even after survey. There are no estate agent fees to pay, no viewers to put up with, and we’ll buy your home exactly as it is, without the expense of redecorating, updating or renovations.By selling to us, you can get on with your new lower cost lifestyle straightaway, and start putting away more money every month to plug your retirement savings gap.

Don’t let your home hold you back

The advice from the World Economic Forum was clear an unequivocal: we need to save more for our retirements and cut the cost of that retirement right now if we are to avoid running out of money in our twilight years.

In a report from the Intergenerational Foundation, "Understanding Downsizing", they found that in spite of the advantages of downsizing to a more aptly-sized home, one of the major reasons people held off moving was the hassle of selling. The report identifies a ‘lack of desire to put in the degree of effort needed to make such a move’ as the main barrier.

Fortunately, we can take away the need for all that effort - and the stress, hassle and uncertainty that comes with a traditional house sale.

Our service is about selling your house fast, and putting you in control. You can contact us today, have a formal offer within 2-3 days, and complete the sale within as little as 2-3 weeks (or in a timeframe to suit you). It's much faster than the 7 months and average home sale in the UK takes. We'll just make you an offer, and if you're happy with it we'll buy your home from you in a timeframe to suit you.

With the help of Yes Homebuyers, you could start that next chapter sooner - and more easily - than you ever thought possible. So don’t let your old home hold you back.

Read more: Visit our main Retirement & Downsizing Hub.

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