When we meet with clients to discuss their financial planning in retirement, they are often surprised to hear us tell them they should consider spending some of that hard earned cash.
The new pension freedoms introduced last April prompted one politician to suggest pensioners might blow the lot on a new Lamborghini.
We are yet to see any of our clients withdraw pension pots and visit a dealership to buy a new Aventador, but some have been spending their money on important retirement projects including big holidays, property for children or home improvements.
New research by Saga Home Insurance has found that spending pension cash on home improvements to create a dream home is a popular choice for many when they reach retirement.
While on average people spend £17,000 improving their home, one in eight say they have spent more than £25,000 creating their dream home since stopping full time work.
[tweet_box]Do you plan to spend pension cash on home improvements? Read this first! [/tweet_box]The research surveyed more than 7,000 retired over 50s and found that, on average, they completed three home improvement projects when they retired.
This included redecorating homes (55%), having a new bathroom fitted (38%) and installing a dream kitchen (36%).
In addition to modernising their home, new retirees also create some personal space so they have somewhere to go to enjoy some ‘me’ time.
One in eight turned a spare room into an office or workshop and 3% create a games or hobby room.
Other home improvements included building a conservatory (11%), extending the house (7%) or adding a porch (5%).
Gardens received some investment in retirement too, with one in three new retirees having completely redeveloped their gardens to the tune of £3,000 on average.
Commenting on the research, Roger Ramsden, Chief Executive of Saga Services, said:
“Throughout our lives we spend time and effort to make our house a home, however it can be hard to manage and oversee big home improvement projects when you’re working full time.
“However, it’s a good idea to let your insurer know before you start any home alterations so you can make sure you’re covered both during the works and beyond.”
How do you plan to spend your cash in retirement? Are you confident that you can afford to renovate your home and garden without the risk of running out of money in later life?
One of the services we offer to our clients is lifetime cash flow forecasting.
Using a series of realistic assumptions about the future, we are able to graphically illustrate what your cash position could be at age 100, based on a variety of scenarios – including getting that new bathroom and kitchen fitted!
It’s a small investment to make to have peace of mind that cash expenditure in the early stages of retirement will not adversely impact on your quality of life in the twilight years.
Whether you are thinking about a new bathroom or a new Lamborghini, we encourage you to put a lifetime cash flow forecast in place first to better understand the financial impact of these spending decisions.
