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What retirement issues face the second wave of Baby Boomers?

What retirement issues face the second wave of Baby Boomers?

For a while we have heard about the difficulties and challenges facing Baby Boomers - the generation born immediately after the end of the Second World War - in funding a happy retirement.

However, we are now beginning to see a second wave come through - the generation who are potentially facing an even more challenging and uncertain retirement. 

This generation of (currently in their 40s) retirees will be the first who will not necessarily have had the luxury of a final salary pension scheme.

For those that do not have the backstop of a final salary pension scheme, many have left themselves insufficiently prepared and have a lack of financial resources.

This is the generation which has seen the investment savings they did make potentially seriously impacted by the global financial crisis of 2008 and are now having difficulty, in part, matching their income expectations in retirement to their lifestyle expectations.

The average retirement savings in the UK is still less than £50,000 and there is a definite imbalance borne out by a number of research papers as to the income expectation from these savings.

Pension freedoms were brought in to help encourage retirement saving by increasing the level of flexibility to access pension pots. But, to date, its impact has been minimal other than increasing the rate at which withdrawals are made, with some 1.5m pots already accessed by retirees and many of these in full.

Couple this with the challenges for funding the state pension scheme and a growing ageing population, and the signs are clear.

Individuals should be increasing their contributions as their earnings grow to save enough to maintain their standard of living in retirement - something many people are failing to do, at a dramatic rate.

This second current wave coming through holds less wealth with regards to property and investments, is deeper in debt, has a rising cost of living and will potentially face higher expenses than the current Baby Boomers.

This will make leaving work at 65 harder, with many having to consider working longer past retirement while reducing their standard of living. 

However, not all retirees lack financial resources, and some have been savvy and obtained sound financial advice, saving and then investing an increasing amount over the years to ensure they can have a comfortable retirement. The ever-present challenge is how to take this behaviour from the few to the many. 

Wealthier and healthier?

One reason for some reticence to invest could be attributed to the perceived uncertainty of investment markets.

An investor loses money, exits their investment in a panic and then loses out on both recovery and future growth. An example of this is the years that followed the financial crisis where markets have done, in the main, well for investors but, of course, only if you were in them.