Not for sale - retirees reluctant to sell homes

retirement savings jar©iStock.com/Oko_SwanOmurphy

JUST 16% of people aged between 55 and 74 are willing to sell their homes to help fund retirement plans, according to research from Aviva.

This is despite the fact that less than half of them believe themselves to be in a financially fit state to retire.

Traditionally, many people have taken out mortgages with the idea that they can free up cash in their twilight years by downsizing.

This makes good sense; according to MoneyFacts, the average amount of money released by moving from a detached property to a bungalow is £102,8512.

However, the Aviva report [pdf] shows that while people might start with the "sell up later" mindset, things change as they get older.

A quarter of homeowners aged between 45 and 54 expect to use income from selling a property when they retire, but this drops to just 17% for those aged between 55 and 74.

There are many possible reasons for this. According to the director of United for All Ages (UAA), Stephen Burke, terms such as "downsizing" can put people off.

"It sounds like you're on the way out," he says.

More practically, many older people find that there simply aren't many housing options available to them.

A study [pdf] by housing charity Shelter showed that while most retirees would like to move within their existing communities, there was little on offer when they tried to do so.

You're not selling, we're not buying

So what does this mean for everyone else? Interestingly, while retirees are increasingly unwilling to sell, the younger generation is increasingly unwilling to buy.

As we've reported elsewhere, 60% of people aged between 20 and 45 aren't saving any money for a house of their own.

A combination of low incomes, high house prices and associated high deposits means that a mortgage is simply not an option for many.

That's not to say that the younger generation aren't worried about the implications - more than half are concerned that they'll never be able to retire if they rent for their whole lives.

The harsh reality is that many will never be able to retire, even if they do buy.

Where does that leave us?

It's no secret that people in the UK aren't saving enough for their retirement - there's an ever widening gap between what people think they'll need and what they're likely to get.

Aviva say that people aged over 45 typically expect to need an annual income of £12,590 when they retire. This amounts to just over £242 a week.

This age group's average savings and investments amount to £53,793, meaning that they could expect an annual retirement income of between £3,117 and £3,635.

Even with a state pension of £6,656, their annual retirement income will amount to just £10,291 (or £198 a week).

So, the average over-45 can look forward to short of £44 short per week when they retire. Annually, they'd need to make up £2,299.

Plugging the gap

Squirreling a little more money away now will make all the difference later. Aviva calculate that saving just £86 extra a month could bridge the gap for a basic rate taxpayer, based on a 45-year-old planning on retiring at 67.

Things change fairly dramatically for those who are older or who have smaller amounts saved. For example, someone aged 55 with £50,000 saved would need to find an extra £178 a month.

For those without any savings, things become a little more worrying. A 45-year-old with no savings would need to start putting away £225 a month, while a 55-year-old would need to find an intimidating £469.

The take home message here is that we need to save, and as early as possible. If that saving takes the form of a mortgage, then the prospect of downsizing in later years might not be a question of preference, but of survival.

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