Fewer than one in four people has a clear financial plan for their retirement and almost half are not confident they will be able to afford the lifestyle they want when they stop working, new research has found.
The study, carried out as part of PTSB’s Reflecting Ireland research, also revealed that a significant number of people are expecting to receive an inheritance, with almost half relying on that to fund their future plans.
The study highlighted that commitment to long-term financial planning falls off in middle age, with only 39 per cent of those aged 45 to 54 years old saying they had a plan in place, compared with 58 per cent of 18 to 24-year-olds. Twenty-two per cent of 55 to 64-year-olds say they are not looking at a long-term plan.
Women lag men in making arrangements for their retirement, with only four in 10 saying they had a financial plan for later life, compared with six out of 10 men.
RM Block
A lack of financial literacy is holding people back, the report says, with more than half of those surveyed saying they were unaware of the small gift exemption rule that allows individuals to receive gifts of up to €3,000 per calendar year from another person tax-free.
“Unfortunately, there is a noticeable gender gap identified across this research, in terms of financial planning and confidence for the future,” said Leontia Fannin, chief sustainability and corporate affairs officer at PTSB. “With greater financial awareness and education, including supports such as the small gift €3,000 exemption rule, it could be possible to start to reverse this trend.”
Inheritance features strongly in future plans, with 51 per cent of respondents saying they had either received or expected to receive an inheritance. For just over half of this group, the amount involved was €100,000 or less, with only 17 per cent expecting up to €250,000 and 11 per cent between €250,000 and €499,000.
One in 25 either has received or expects to receive in excess of €500,000 in inheritance.
Almost half of those expecting to inherit said their long-term financial goals were “fairly reliant” on it. Some 35 per cent said they were planning to use it for house-related expenses, while 45 per cent would use it for savings.
“The research shows that inheritance is a key part of many people’s future financial plans, with a significant number who say they are relying on inheritance to achieve long-term financial goals,” said Fannin.
“Cost of living and affordability is people’s top concern about growing older in Ireland. This corresponds with the large numbers who say they are not confident they will be able to afford the lifestyle they want in retirement.”
On the other side of the equation, roughly half of all respondents said they planned to leave inheritances of up to €250,000, with 28 per cent expecting to leave in excess of that.
“It’s understandable that so many are worried about the cost of living today and are preoccupied by how to deal with it. However, it is vital that we plan for our long-term financial future, as if we don’t, we may lose out in later life,” said Claire Cogan, founder of BehaviourWise.
“It’s a real concern that so many of those aged mid-40s to mid-60s have no long-term financial plan yet, and many have no plans to make one. Any time spent on financial planning during these years will reap benefits later on.”
