Are you planning on renting in your golden years? Then you’ll need a whole lot more saved than those who own their homes.
A new study by Standard Life has revealed a stark difference in retirement planning needs for those who own their homes and those who plan on renting. The news isn’t good for renters – they’ll need a whopping £400,000 more saved!
Renters Need Twice as Much
The researchers looked at average monthly rent figures from the Office for National Statistics (ONS) and projected costs for a 20-year retirement period. They found that renters could need between £600 and £3,000 per month to pay for housing costs – a total of £839,000 per household. That’s nearly twice the amount that homeowners need to cover their housing costs in retirement!
Regional Differences
The study also found significant regional variation in rental costs. In London, for example, renters can expect to pay £2,060 per month in year one of retirement and a staggering £3,290 per month in year 20. In the Northeast, rental costs are much lower, with an average of £660 per month in year one and £1060 per month in year 20. These figures don’t take into account inflation or interest rate changes.
The Growing Challenge of Home Ownership
It’s a worrying trend for those approaching retirement. The cost of owning a home is rising, and the number of people owning their homes is falling. Research suggests that by 2041, only 63% of people will own their homes, down from 78% today.
What This Means For You
If you’re planning to rent in retirement, it’s important to factor in the additional costs. You’ll need to save significantly more than those who own their homes. This may mean contributing more to your pension or finding other ways to supplement your retirement income.
Expert Advice
Claire Altman, managing director of individual retirement at Standard Life, says, “For those who don’t eventually buy, these figures highlight the likely additional savings to be factored into budgeting.” She encourages people to consider “how pensions and property work together” and to use tools available from providers to help them reach their retirement goals.
It’s never too early to start planning for your retirement. Speak to a financial advisor to get personalised advice and make sure you have a plan to cover your housing costs in retirement.