Reaching retirement age is undoubtedly a bittersweet moment, but it is nonetheless one that many of us anticipate and embrace. Recent economic events, though, have made it harder to get excited about the prospect of reaching pension age.
Rising inflation is palpably impacting households of all kinds, and dire questions are being raised about the affordability of retirement going forward. But what exactly is the impact of the current cost-of-living crisis on retirement-age citizens, and how might you better weather the storm financially?
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Retirement and the Cost of Living
The cost-of-living crisis describes the ongoing affordability issues plaguing millions of households across the country. It was initially caused by a spike in the price of natural gas – an event itself precipitated by several different events.
The disruption caused by Russia’s attempted invasion of Ukraine coupled with existing trade issues brought on by the Brexit withdrawal agreement led to domestic and commercial energy bills rising unsustainably.
Meanwhile, trade barriers also had a partial hand in rising costs across industries, which were passed on in the form of higher prices for household goods. Over a year on, inflation has not subsided significantly, having rendered living costs much higher than before.
This is of particular concern for retired and pension-age citizens, whose income is fixed, and spending power unilaterally reduced unless they return to the workforce. This has already had disastrous consequences, with many older people risking ill health to keep the heating off.
But what options are there for older people to create financial security?
Generating Income
First, it is important to acknowledge that government assistance is available for eligible citizens, including those of pension age. The Cost of Living Payment is available for many to claim, though it is not a large enough sum to completely cover the cost of certain expenses.
It can, however, be a good subsidy for further income generation methods.
Rather than returning to part-time work, pension-age people who own property could utilise their property’s value to fund their living costs. They could do this by downsizing to a smaller property and pocketing the profit from the sale. But, if settled and unwilling to move, they might instead be able to take advantage of equity release programmes to access the value locked in their property without leaving it.
Saving Money
But generating income is not the only approach to consolidating finances. It may also be necessary to review ongoing costs and seek routes to more effectively saving money.
Simple things like carefully managing a grocery budget can help keep weekly costs down, while long-form habits relating to energy and water usage can help reduce expenditure on costly utilities.
In retirement age, it is still possible to maximise returns on savings. Using a stocks and shares ISA might help a pensioner engage with the stock market tax-free, and enjoy gains on existing savings as a result.
