Major sacrifice for millions to afford comfortable retirement | Personal Finance | Finance

According to Scottish Widows, 15.3 million Britons – that is 39% – are at risk of not covering essential costs during retirement. But there is a glimmer of hope if they can embrace one significant lifestyle change before retiring.

Selling their homes and downsizing, or moving to retirement communities, may be the only option for millions of people, says James Daley, the founder and managing director of Fairer Finance.

By the year 2040, more than half the retiree population will be dependent on their property wealth to maintain a stable retirement life according to the firm’s latest estimates.

Speaking with the Telegraph, Daley advised: “Once your children have flown the nest, it makes sense to think about moving to a smaller property…In practice, their options are often limited.”

Downsizing is becoming increasingly challenging though, as the expert pointed out the scarcity of suitable retirement homes. Furthermore, one of the few alternatives, equity release schemes, is still struggling to get widespread appeal, as James pointed out.

Nonetheless, Daley is still hopeful that keeping people well informed about their options, especially offering guidance when considering remortgages in later life stages like their 50s, 60s, or 70s, can help prevent a significant downgrade in living standards post-retirement.

He suggested: “So if you’re coming up to retirement over the next 20 years and you can’t see yourself having the spare cash to bolster your pension pot, then it’s worth starting to think about the value in your home.

“It could be the key to a happier, more financially secure retirement.”

According to the latest report by Scottish Widows, only a scant 16% of those aged 60 to 64 are on course for a comfortable retirement, with a worrying 42% likely to have savings below the threshold needed for even a basic standard of living.

Meanwhile, a more optimistic 40% of people aged between 30 and 39 are expected to enjoy a comfortable retirement. At the same time, just 30% of this age group is projected to struggle with poverty, placing them as the age group most prepared for their later years.

Experts have also warned that people might be overestaimting the power of the state pension. The full new state pension offers £11,973 annually.

But only about half of pensioners receive the full sum as it relies on them having at leats 35 years of National Insurance contributions, any less and their state pension sums start to fall in kind.

Even for the lucky few receiving full new state pension, it’s still significantly lagging behind the cost of a decent retirement. The Retirement Living Standards report suggests that a single person requires at least £14,400 per year to cover basic expenses.

A moderate retirement costs £31,300 for singles and £43,100 for couples.

However, to fully enjoy your retirement with a comfortable lifestyle, it will cost you £43,100 per year for individuals and £59,000 for couples.