A little thread for you:
IFS @TheIFS
Multiple property ownership is becoming more common among older people than in the past, and these properties tend to be held onto throughout retirement
SEE IMAGE.
Paul Johnson @PJTheEconomist
Every time I see this chart I am amazed. ONE in SIX 55-64 year olds owns a second property.
It's the flipside of low ownership rates among the young - they are renting from their parents' generation. The allocation of housing, not just the quantity, matters.
Faisal Islam @faisalislam
7.6 million in that age group - so this stat beliw would suggest 1 million plus of limited and slowly growing U.K. housing stock owned as a second home - a Venn diagram of people owning second homes and voting against new ones being built would be interesting...
amazing stat- higher than I would have guessed, from this interesting @TheIFS report where economists point out that the tax system is economically unsustainable and suggest a currently politically unsustainable change to tax wealth more and income less
www.ifs.org.uk/publications/12959
The use of wealth in retirement
There has been lots of recent research and debate on individuals’ accumulation of wealth for retirement, driven by the concern that younger generations are not saving enough. Much less attention, however, has been paid to how individuals use their wealth once in retirement. This is an important omission, since understanding more about the evolution of wealth in retirement can help shed light on:
- the extent to which such wealth is currently used to finance spending needs in retirement (and, therefore, the extent to which younger generations may need to accumulate similar sums in order to have similar standards of living in retirement);
- the extent to which current retired generations’ wealth is likely to be bequeathed (which has direct consequences for the resources of later generations);
- how people manage their resources through retirement (which is of increased importance given the introduction of ‘pension freedoms’).
Median non -pensio n wealth among these individuals [55 - 65 year olds] is £250,000 (mean non-pension wealth is £390,000). The majority of this wealth (60%) is held in owner -occupied housing, with 22% held in financial assets (current and savings account s, ISAs, stocks and shares etc.), 11% in other property and 7% in other assets ( such as business assets, land and antiques). What happens to housing wealth in retirement will therefore be the big driver of changes in individuals’ overall wealth.
Wealth is held very unequally the least wealthy 10% of individuals have essentially no wealth on average, while the richest 10% on average have in excess of £1 million.
Where do they expect money to come from for retirement?
The most commonly cited source is the state pension, which shows a distinct age trend: increasing proportions of individuals expect to receive state pension income as they approach retirement, reaching over 90% by age 60 . The next most commonly cited source is private pensions, again increasing with age, reaching two-thirds of those in their 50s. Perhaps less expected, over 40% of individuals report expecting to use savings to provide money for retirement suggesting many individuals expect to draw down accumulated wealth. Around 30% report expecting to use their primary housing (through downsizing, taking equity withdrawal o r renting out rooms)
Problem here. Millenials can't afford to move up the ladder. They are living in smaller houses to those generations above and they will never be able to acculumate enough to move up. The double whammy is that with baby boomers downsizing and they are also facing more competition (thus higher prices) for smaller properties.
The net effect is that boomers either can't downsize or won't get as much money from their property as they are expecting and that there is a band of smaller 2 / 3 properties which are going to end up over inflated in price (especially since the trend in recent years by builders has been to build bigger properties outside metropolitian areas because they make most profit on them). The whole current structure of the housing market is about to implode from this alone - with major implications. Expectations are not going to match reality.
These findings suggest that precautionary saving, bequest mot ives and financial acuity all play a role in individuals’ choices. The result is that the majority of financial wealth is set to be bequeathed rather than spent during retirement. This has direct implications for younger generations - they are likely to inherit the majority of their parents’ current financial wealth (in addition to other assets such as housing) . Given wealth inequality, some individuals will inherit little, while others will inherit substantial sums
This also suggests that plans are currently being made in families across generations which both generations are aware of. If a spanner is thrown in the works, and there is a total collaspe in social care to a level that has not been planned for, this could be problematic.
^The EoL data suggest that in England there are not such large expenses on average. Just 6% of individuals faced some out-
of-pocket costs for medical treatment out side the NHS in the
last year of life. We do not have dat a explicitly on social care expenses, but the EoL data do tell us that only around 7% of individuals received assistance with daily activities from a privately paid employee in the run-up to death. Some 21% did stay in a nursing or residential home in the last two years of their life (32% of these stayed for six months or more), but not all of these individuals would have paid for this care privately.^
This is frankly unsustainable. Its going to increase. Again expectations v reality are going to kick in at some point.
Decreases in tax revenue with an aging population who are not taxed through income tax are also something of an issue here.
Also if one of your parents live until their 80s or 90s, you are going to have a LONG wait until you get any inheritence. You are likely to also be also approaching retirement yourself with kids long since gone.