There is a clear focus on consumer spending at present, particularly with inflation rising at a disproportionate rate to earnings. This is something that is currently affecting all age ranges, with UK consumers now likely to have 23% less income than in 2016 according to new research.
This is not the only recent study that has explored the concept of disposable in a difficult economic climate, with financial planners Tilney having also commissioned a report into how much UK households are destined to spend from a certain point in their lives.
We will explore this in closer detail in this article, and ask how those approaching their retirement can look to reduce their expenses?
1.Energy Should be a Key Focus for Households
Unsurprisingly, energy is one of every households’ biggest expenses, particularly with the so-called ‘big six’ energy firms driving up costs on an annual basis. In short, citizens who have just turned 60 can expect to pay an estimated £13,862 in future electric costs, while gas will set them back a further £14,998. With water costs in the region of £11,336, this represents a sizeable energy spend in excess of £40,000, which accounts for a significant chunk of your likely pension funds.
In fact, your choice of energy supplier has a key bearing on the amount that you will pay during this time, with two of the big six suppliers (namely SSE and ScottishPower) having reportedly lost thousands of customers during the last year as customers have moved to cheaper providers. So, by comparing the market outside of the big six and seeking out incentivised deals with independent providers, you can reduce your annual retirement spend considerably.
2. Use Your Time to Minimise Maintenance Costs
If you are beginning to wind your career down as you approach retirement, you may find that you have a greater amount of time at your disposal. This can be used to actively reduce certain costs within your home, particularly if you can take ownership of simple and relatively low-skill maintenance tasks throughout.
Those over 60 can expect to spend up to £9,692 in household maintenance for the remainder of their lives. This is a hefty sum, and one that can be reduced by tackling simple but time-consuming tasks such as repairing guttering, repainting and cleaning windows.
This approach will save small but significant sums of money over time, reducing your spend and creating a nest egg that can be used to hire skilled professionals for more complex tasks.
3. Budget for Life Outside of Work
Tilney’s study also revealed that the average British household will require an annual retirement income of £14,100 above the state pension to cover their costs, which is why the above measures are important as they actively help to reduce your living costs in later life.
This potential shortfall in income also reaffirms the importance of budgeting for your retirement ahead of time, as you look to account for a change in your pattern of income and the inevitable fluctuations in living costs.
You can eliminate the majority of work-related costs (like lunch money and travel), for example, in order to increase your disposable income levels. This must then be deployed across alternative costs such as healthcare, leisure and potentially travel, so that you can amend your budget and minimise costs without ever compromising on the quality of your life.