If you’re passionate about travelling, chances are you’re already drafting up a bucket list of far-flung destinations that you’d like to explore once your work commitments are over. However, is retirement travel in decline? Research from True Potential Investor, a provider of stocks and shares ISAs and personal pensions seems to suggest so.
In True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 publication, a disparity in travel attitudes between age groups became strikingly visible. For a number of years, a round-the-world trip has been the retirement dream for many – and it seems that 25-34 year olds are keeping this dream alive.
Despite just over 2% of over 55s saying they would do the same, a quarter of 25-34 year olds said they would use their 25% tax-free lump sum to fund a round-the-world trip. Highlighting a clear disparity in attitudes, perhaps this difference could be attributed to a more realistic outlook from over 55s. While 25-34 year olds are hopeful about their pension potential, over 55s are closer to retirement and are therefore more aware of the limitations of their pension pot.
In total, over the course of their lives, the average 55 year old will accumulate a 51,446 pension pot. This would deliver a tax-free lump sum of around 12,900 – an amount that is dwarfed by the actual cost of a round-the-world trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around 48,000 – nearly the entirety of an average 55 year old’s pension pot.
Based on the sum of 12,900, retirees could take a 35-day trip halfway across the South Pacific. This is based on a single traveller; throw a partner into the mix and the trip would take them from Panama Canal to California. This might be why so many are opening a 401k account to top up their saving pot. 401k accounts give you the option to supercharge your savings, meaning you can reach your pension goals faster – if you want to know more, find out here.
But what about attitudes to holidays in general? Are they changing too? It seems that over 55s are also changing their views on holidays in general in retirement. Just 10% of over 55s said they were going to take regular holidays once retired, while 34% of 25-34 year olds said the same.
What can we attribute this change of attitude to? Could it be a growing realism amongst pension savers? The survey suggests that people are only becoming aware of the reality of their pension pots when it’s too late, which should motivate young people to start contributing sooner, no matter how small the amount.
Retirement age is also going up, so whilst grandparents might have retired in their late 50’s or early 60’s, parents are now retiring in their mid to late 60’s. By the time 25-34 year olds come to retire, retirement age will be closer to 70. This leaves less healthy life to actually go and explore the world, with medical issues being more of a concern than travel as you hit your 70’s. Driving becomes harder as your reactions slow down, meaning you become less able to travel by yourself. Many countries now also require the elderly to retake their driving test in order to carry on driving. A driver’s license for the elderly (or rijbewijskeuring ouderen as they say in the Netherlands) is becoming increasingly common, meaning fewer older people are able to drive and therefore travel.
The report’s findings also show a positive shift in pension attitudes in young people. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their pension pots, down from 26% in the previous quarter. With this figure expected to grow, future retirees may not need to give up on their travel dreams.
Find out how much you’ll roughly need in your personal pension pot by the time you reach retirement, by completing a quiz from True Potential Investor on their website.