Look, we here at The Motley Fool get it. Record levels of UK citizens may be in employment, and wage growth may be picking up, too. But the colossal cost of modern living means that many of us simply aren’t able to build up as large a pension pot as we would hope.
What isn’t as easy to explain away, though, is the number of people who treat the issue of retirement saving as something that can be put off for another day, or something that they don’t have to worry about at all. And the number of people who subscribe to this school of thought is simply mind blowing.
40 million in danger
According to Sanlam UK more than three quarters of British adults – 77%, to be exact – have failed to set a savings target for their retirement. To break this down further, 71% of all men are failing to set a financial goal while the number rises to 82% for women.
So what does all this mean? Well right now there are a stunning 40m people just casually sleepwalking towards retirement. The financial planning firm’s report shows that around 39% of all adults simply don’t believe that setting a financial target is an important aspect of their financial planning, possibly setting themselves up for a life of poverty post-retirement.
As Jonathan Pollin, chief executive of Sanlam UK, comments: “The gap between what people think they need and what they actually require in later life is huge, and sometimes life-changing. Despite years of industry effort to turn the tide, engagement with longer-term savings… is shockingly low. This suggests that we are about to see a tidal wave of people coming into retirement who will be ill-prepared and severely disappointed when faced with their retirement reality.”
Sleepwalking into poverty?
What is staggering, however, is that at the same time a staggering number of people don’t believe that they’ll have enough money stashed away to retire when they want. According to the study, 55% of UK adults fall into this category, suggesting that denial could be as big a problem as downright laziness.
Either way this is a recipe for disaster. As I explained in a recent piece, a new report from the Pensions and Lifetime Savings Association suggested that citizens will need to build up a staggering £587,000 pension pot in order to live a comfortable lifestyle in retirement. Even those seeking to live a moderate lifestyle will need to stash away in excess of £267,000, apparently.
How else can one possibly hope to accrue these astronomical sums without formulating a plan? To hit these levels it’s clear that savers need to have a clear idea of how much they need to set aside each month, as well as how to generate a decent return on our money.
At Fool Towers we believe that stock investing is a brilliant way to make a giant pension pot and through a tax-efficient product like a Stocks and Shares ISA, too. But before you start you need to work out what kind of lifestyle you want to live after retirement.
So don’t live in denial; long-term returns from share markets stand at between 8% and 10% per year, providing plenty of opportunity to make some big bucks for your post-work lifestyle.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.