Generation X is likely to be facing big life and financial decisions. Yet, only a small portion is working with a financial adviser to ensure their future is secure.
A nationwide study conducted by financial technology company Dustan Thomas found that just 8% of those aged between 39 and 54 has spoken with an independent financial adviser in the last year. This is despite many within this age group approaching financial milestones. If you’ve been putting off getting to grips with your financial future, it’s not too late.
Setting out your life goals
The first thing to do is think about what your life goals are in the short, medium and long term.
These goals should be the driving force behind your financial plan. Whilst you’re still working, it can seem like retirement or planning to help children get on the property ladder is a long way off, but these long-term goals are just as important as the ones just around the corner. By setting them out now, you’re more likely to achieve them.
Remember, the goals you set out now aren’t set in stone. You may simply change your mind or factors outside your control may force you to evaluate. Regularly going back to your aspirations, and how you will achieve them, is just as crucial as the first step.
1. Making the most of your earnings
As you reach your 40s and 50s, your income is likely to be higher than it was in the past. So, how do you make the most of this?
Should you overpay on your mortgage? Or should you start building an investment portfolio? Perhaps, you should increase your pension contributions?
There’s no single right answer here. Your decisions should come back to your lifestyle goals. But taking steps to understand the long-term implications of the financial decisions you make now can help you pick the right path for your aspirations and current financial situation. For some, reducing mortgage debt will help them free up their income in later life in order to retire early. For others, it will make more sense to invest their capital to build up a flexible income in the future.
2. Planning for retirement
According to the research the average Generation X worker has £159,837 in their pensions and contributes just over £200 per month.
Whilst retirement may still seem a long way off, it pays to start thinking about the lifestyle you want and whether it’s achievable based on current pension projections. Just 20% of Generation X plan to access their pension within the next five years. The findings suggest that most have an opportunity to fill potential gaps should they find aspirations and reality aren’t aligned. The sooner you know there’s a gap in your pension, the greater the chance you have to bridge it.
Worryingly, 48% of women and 34% of men had never heard of Pension Freedoms, and 30% have heard of them but don’t understand what they mean for retirement. These pension reforms were brought in five years ago and give you far more freedom in how you access your pensions, but also bring additional responsibility too.
It’s important you understand your options; what is right for someone else may not be appropriate for you. The decisions you make at retirement could affect the rest of your life. Please contact us to understand how your pensions savings can be used to create a retirement income.
3. Providing for the next generation
At this stage in your life, you may be considering how you can financially help the next generation. You may have children or even grandchildren that you want to provide for.
Balancing your financial needs with your desire to give a helping hand can be difficult but it is possible to balance the two. For example, you may want to pay for school fees out of your regular income or start building up a nest egg that can be used for a first home deposit in the future. Setting out these goals can help you achieve them. The best course of action will depend on many factors; including your aspirations for helping loved ones but this is an area where we can provide support. We take the time to understand what your hopes are, so we can set out the right path for you. When planning for the next generation this could include:
- Contributing to a Junior ISA
- Gifting lump sums
- Providing gifts from your income
- Writing a will and estate planning
If you’re part of Generation X and would like to review your finances with a financial planner, please get in touch with us. We’ll help you see how the steps you’re taking now will impact your future security and ability to achieve goals.
Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefit available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change.
The value of your investment can go down as well as up and you may not get back the full amount you invested.
Will Writing and Estate Planning are not regulated by the Financial Conduct Authority.
Will writing is separate from our relationship with Quilter Financial Planning who are not responsible for this service.