Parents are dipping into savings to help with living costs – and it could leave them short in the future
As research suggests people are using retirement money early to help support their families, Vicky Shaw finds out more.
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Your support makes all the difference.As the cost-of-living crisis squeezes budgets, some people could be risking leaving themselves with a savings shortfall in retirement – as they dip into savings to help support their families, new research suggests.
Nearly a quarter of parents (24%) have already accessed, or are planning to use retirement funds early to help deal with rising living costs, according to research from financial services company Killik & Co.
One in 12 (8%) parents say they have already dipped into savings for later life to support their children - a decision that could leave them with a funding black hole in retirement.
Two-fifths (40%) of parents say the cost-of-living crisis is worse than they expected, with energy bills causing most concern, followed by food bills, fuel, housing costs and education, including private school fees.
Recent Killik & Co research found a third (33%) of parents are concerned about the ability of their children and grandchildren to cope with higher costs, and more than a fifth (22%) have changed plans to transfer wealth as a result.
Will Stevens, head of financial planning at Killik & Co, says: “We’re in the midst of an unprecedented economic period, with inflation at its highest level in decades. As a result, many families are making tough financial choices, including using long-term savings to make up for shortfalls in their own budgets and those of their children.
“Some parents will have no choice but to access these savings early or reduce contributions, significantly impacting the lifestyle they can fund in the future,” he adds.
While it’s understandable people are doing what they can to help their families right now, Stevens suggests it’s a good idea to think carefully about any major financial decisions.
“Accessing or making changes to your pension is a major financial decision, so it’s important seek expert advice, if at all possible. A good financial planner can provide clarity and advise on the best steps to take if circumstances change, for better longer-term outcomes,” he says.
“This includes helping you balance where to draw your funds from, whether pensions or other savings, any tax implications – something that cash flow modelling can play a key role in – and all the options available to you.”
Households may also want to check they are getting all the financial support they are entitled to. More information can be found at helpforhouseholds.campaign.gov.uk.