Until my grandmother passed away last year at the age of 91, she and her daughter (my mum, aged 63) were retired at the same time. This lasted for close to half a decade and made it possible for my mum to spend much more time with my grandmother in her final years, visiting her almost daily.
Situations like this are becoming more common and present a great opportunity for people in their 50s and 60s to strengthen their relationships with their elderly parents and relatives. But they also come with financial consequences.
St James’s Place estimates that there are currently 813,000 families with more than one generation retired, a figure that in the next decade is projected to increase by almost a third to 1.1mn. As it stands, numbers are growing faster than previously thought – in 2018, the same study projected that there would be 704,000 multi-retiree families by this year. Whether the trend will continue in the future will also depend on how soon people are able to afford retirement and whether life expectancy progress continues or stalls once again.
With defined benefit pension arrangements still relatively common among older generations, in many cases having two retired generations in the family does not present huge financial concerns. But this may start to change as more people rely on their investments to fund their retirement – a retirement that can often start well before the state pension kicks in.
We often talk about sequencing risk for those drawing down a pension: if you need to draw from your assets at a time when markets are falling, it will take a lot longer for your pot to recover, and so you may run out of money sooner than expected. If both you and your parents rely on investments to fund your lifestyle in retirement, both generations are exposed to market movements and sequencing risk at the same time. So it’s even more important to have diversification in your portfolio and enough cash at hand to weather storms.
Longer life expectancy means retirement pots will need to last longer and potentially be enough to fund care fees. At the same time, you might want to use some of your pension to support your children, grandchildren or indeed older parents. A St James’s Place poll found that 55 per cent of future retirees expect to provide financial support in retirement to other generations, compared with just 37 per cent of current retirees.
Meanwhile, for younger people, having both their parents and grandparents in retirement comes with the somewhat startling realisation that they are the sole member or generation in the family actively earning an income. This can feel daunting even when their retirement provisions are solid – a conversation I have had with more than one friend.
Claire Trott, divisional director for retirement and holistic planning at St James’s Place, says that as a result of people living longer, pensions becoming more the responsibility of the individual, the economic landscape evolving and future retirees increasingly expecting to financially support others once retired, “retirement income is having to stretch in multiple directions”. It's cases like this where early financial planning can make all the difference, allowing you to enjoy retirement at the same time as your parents in comfort and financial security.
