Sorry millennials, you’re never going to retire

Harvey Jones says today’s younger generation faces a stark choice: invest now or work until you drop.

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I hate to be the bearer of bad news, I really do, but someone has to say it. If you are under 40, the age of retirement has passed on. It is no more. It has ceased to be. The reason is quite simple: you will not be able to afford it. There are exceptions, and you can be one of them, but only if you take action now.

Basic facts

First, some facts to scare the life out of you. The full basic state pension is currently £119.30 per week. That works out as £6,203.60 a year. Do you fancy living on that for the last 30 years of your life? Worse, to achieve that princely sum you have to make 35 years of National Insurance contributions, otherwise you might get less.

Here’s another worrier. The age at which you can claim this money is set to rise and rise. By October 2020, it will synchronise at 66 for both men and women. It will hit 67 by 2028. Thereafter it will rise with our growing life expectancy, and at some point will fly past 70 and beyond.

The state you’re in

The state will only ever give you the most threadbare income, and you will have to wait longer and longer before you can claim it. If you want to retire some point in your life, you need to start saving under your own steam.

Last year, pension provider Royal London warned that British workers will have to carry on until age 81. Unless people start seriously saving, “we are witnessing the death of retirement”, it concluded. Do you really want to be working at such an illustrious age – out of financial necessity rather than choice? 

Invest, invest, invest

If you belong to a generous workplace pension scheme, then love, honour and obey it, and feed it. Make the maximum possible contributions, even if it hurts, and in return you will get an employer top up and tax relief. However, do not assume this is enough on its own: employees pay around just 5% of their salary into a pension, they need to be saving around 15%. You need to start investing off your own bat as well. If you do NOT belong to a company scheme, saving for your future is even more important.

The older generation used to envy the young, but no longer. Student debt, spiralling house prices, stagnating wages and zero hours contracts have ruined all the fun. More than 1m Britons now turn 40 with NOTHING saved for retirement, according to pension provider Zurich. Today, it rocks to be old, at least financially. 

Forget me not

I know that investing for retirement is just another demand on your pocket. But if you don’t start early you will squander the one thing in your favour: time is on your side. If you invest £1,000 at age 30 and it grows 5% a year it will be worth £6,081 by age 67. If you invest £1,000 at 50 and it grows at the same rate, you will have just £2,292. The first pound you invest is the most valuable of all.

So, millennials, prove me wrong. Start investing now. Otherwise, retirement? You can forget it. Sorry.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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