Are you a retiree who is enjoying the chance to SKI?
For the uninitiated (don’t worry, you’re not alone), SKI stands for ‘Spending Kid’s Inheritance’.
This is the latest acronym on the block, joining DINKs (Double Income No Kids), DINOs (Double Income No Options) and the 80’s YUPPIEs (Young Upwardly-mobile Professionals). It’s used to describe those who are making their own enjoyment more of a priority than leaving an inheritance for children and grandchildren.
According to research from Sunlife, two-thirds of over-50s are choosing to SKI their way through retirement. Meanwhile one third of those in their 60s and 70s are still saving so that they can leave a legacy.
Support is a two-way street
The media portrays a story of a rich older generation, who shoulder the burden of leaving a legacy which will support their children and grandchildren financially.
However, the research shows a more balanced need to rely on support from another generation. 20% of older people say they will need to accept financial help from their children or grandchildren. Meanwhile the same number of children will need their parents to lend them money when they retire.
The expert’s opinion
Ian Atkinson, SunLife’s marketing director, defended those who have chosen not to put every penny away for other people to enjoy:
“They are said to be enjoying the finer things in life while younger generations supposedly struggle but our research shows their children are not bitter.”
“Grown-up children do not see their parents as selfish simply for spending and enjoying their own hard-earned cash, he added: “Most are happy to see their parents having fun with their cash, and often benefit themselves with a third lavishing money on children and grandchildren.”
For both parents and their adult children, relying on the other for financial support could be disastrous without proper financial planning. There’s no point factoring a potential inheritance into your budget, if it might not materialise due to your Mum and Dad choosing to use it to go on a nice cruise instead.
The key here is communication.
The first step toward sensible spending in both working life and retirement is to talk to one another. It might be difficult to get started, but it is worth knowing if your parents will be looking to you for financial help in later life, or vice versa. That way, both parties have time to plan and make sure that there is enough money for all of life’s challenges.
Is SKI-ing a bad idea?
Not necessarily. According to the research, 90% of people are not bitter about the way their parents spend money in retirement. In fact, the majority are happy that their parents are enjoying life now that they are free of work.
But there should be a limit to that spending, or you may find yourself facing financial difficulties in later life.
Not leaving enough money when you die is one thing; but running out before you do is a lot more painful.
Being sensible with your retirement income will reduce your chances of:
Running out of money too soon: Underestimating how long you will live, or overestimating how much you can afford to spend each year could leave you in danger of financial crisis in later life.
Being unable to leave a legacy at all: While leaving an inheritance may not be your main priority, you might still be planning to leave what is left of your estate to your loved ones. However, running out of money too soon, or spending too much in early retirement could make that impossible.
Being unable to afford care costs: Unfortunately, later life brings an increased risk of illness and the need for healthcare or assisted living. Both of which can be very expensive, with the average cost of care recently breaching £1,000 each week (Source: UK Care Guide).
There are three steps to making your money last for the rest of your life:
1. Don’t underestimate your life expectancy:
Research shows that many people estimate their life expectancy at far below the national average, as well as misjudging how long they will be retired for, this means that those people are at risk of spending their money far too soon and facing financial challenges in later life.
2. Draw money down sensibly:
With so many options available when accessing your pension, it is worth thinking about how you will draw down an income to make your capital last for the rest of your life. Whilst only financial planning can tell you exactly how to achieve this, a good foundation is to use a regular and guaranteed from of income, such as an Annuity to cover fixed living costs, whilst drawdown options can be used to pay incidental and ad-hoc expenses.
3. Financial planning:
Careful financial planning will leave you with a strategy to make sure your money lasts into retirement, whilst supporting your intended lifestyle. In addition, a financial plan means that you can feel more secure and confident in your finances.
To discuss how financial planning could help you to plan your retirement finances, please get in touch with us on 01664 77 88 99.