Fifty per cent of middle-aged would run out of money in six months if they stopped working

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New research by Alliance Trust Savings finds almost half (45 per cent) of middle-aged people who currently have an above average income would run out of money within six months of losing their main income. This rises to two thirds (67 per cent) of those with £499 or less available to spend each month, highlighting the fragility of mid-life finances.

The nationwide survey of 1,000 45 to 55-year olds with either individual incomes of £35,000 or more a year or household income of at least £60,000 and some level of household savings, was carried out to shed more light on the challenges faced by people in their mid-life years. It revealed that large numbers would struggle to survive on their savings and investments for much more than three months in the event of losing their main source of income.

Across the nation, 45 per cent would survive no longer than six months on their savings and investments in the event of losing their main income, and the figure rises to 67 per cent for those who have a monthly disposable income of £499 or less to spend each month. Even those with more than £1,000 disposable income per month would struggle to stay afloat long term if they lost their main income, with over a third (35 per cent) saying they would get into financial difficulty after six months.

The survey also asked whether respondents had a retirement plan in place and how they were most likely to fund retirement:

  • Although one in three people have clear goals for how and when they’ll retire and financial plans in place, 13 per cent said they don’t know how or when they’ll be able to afford to stop working and retire.
  • Almost two thirds of people are relying on the state pension as part of their retirement planning, including 67 per cent of those with disposable income of £750 to £1,499 a month.
  • A third (33 per cent) of people with two children expect to work past their state pension age to compensate for saving too little for retirement, compared to a quarter (26 per cent) of all respondents.
  • A quarter (23 per cent) of separated or divorced respondents to say they don’t know how or when they’ll be able to afford to stop working and retire, compared to 13 per cent of all respondents.
  • People in the highest disposable income brackets are most likely to fund their retirement with rental income from a property they own.
  • Respondents with the least disposable income are the most likely to work into retirement, with private pensions, savings and investments more prominent as disposable income increases.

Sara Wilson, Head of Platform Proposition at Alliance Trust Savings, said: “With much of the recent focus on younger generations and those in or at retirement, it can be easy to overlook the scale of the financial challenges facing people in their mid-life years. While the late 40s and early 50s can be seen as a time of stability and security, for many it is anything but.

“From ill health and insecure employment to the demands of children and the effects of separation or divorce, those in their middle years can be vulnerable to a range of financial difficulties and potential shocks.

“Our research shows that in the mid-life years, managing current financial demands while saving for later in life can often be a tall order. Putting plans in place, keeping a close eye on them and seeking professional advice where necessary is essential in enabling people to get the best out of their finances and take the stress out of the mid-life years.”

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