A new report from UK-based investment experts, Scottish Widows, has highlighted the need to adjust our perceptions of financial planning for future generations.
A Lifetime of Saving
With the Office for National Statistics (ONS) predicting that a third of babies born in 2012 will live to be 100, the effects of improved medical care and increased life expectancy are set to force future generations into thorough personal financial planning.
Economics expert, Steve Lucas, points out that with living longer comes the expectancy of working for more years.
The next generation of children will, he forecasts, be working into their seventies, yet still facing a prolonged retirement period of 30 years.
Currently, it is estimated that a pension fund of £1 million ($1.59 million) will see the average citizen through retirement.
For children born this year, however, that figure will balloon to £2.4 million ($3.8 million), increasing the pressure already being felt by today’s working generation to start saving early in their careers. Despite projected longevity, ‘new centenarians’ will need to begin saving for retirement at age 25.
Economy and Rising Debts
Along with pension contributions, large proportions of the next generation’s salaries will be earmarked for paying debts. Lucas predicts that, with the trend for ever-escalating tuition fees set to continue over the next decade, UK graduates of tomorrow will be saddled with hefty student loans of an average amount of £73,000 – a sum that they will hope to repay by age 52.
New centenarians can expect to be paying mortgages for longer, eventually paying them off at age 61. Their parents, based on figures relating to those born in 1983, can expect to be relieved of their mortgages at age 57, whilst the previous generation (born in the late 1950s) were mortgage-free by the age of 54.
Higher Projected Incomes
It’s not all bad news, however. Funding the escalating cost of saving, studying, and living are higher salaries. Whilst parents of this years’ new generation bring in an average salary of £22,000 ($34,900), their offspring can expect average earnings of £57,000 (about $90,000).
Those born in the 1980s, despite showing concerns for the ability of their children to fund a lengthy retirement, are still largely optimistic for the future generation. Scottish Widows found that 41% of parents surveyed are excited about the notion of family members living longer, and 37% felt that increased life expectancy would lead to a more productive, high-achieving generation due to improved health.