What are the over 40s doing with their cash?

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Good With Money recently pulled together a guide in their quest to try and understand finance for the over-40s – and the results make for interesting reading:

The wage peak – for men

Finances are markedly different for men and women in their 40s. Men aged between 40 and 49 will be reaching their peak earning potential, pulling in just under £34,000 each year.

Women are not so lucky. According to the report, their earnings peak is reached before the age of 39. Once into their 40s, average earnings begin to decline, giving them an annual income of approximately £27,000.

Averaged out across both genders in the whole 40-49 age bracket, annual salary is approximately £30,500.

Over-40s carry a lot of debt

Most homeowners in the 40-49 age group still have a mortgage on their property. As they are no longer paying out for childcare, these people should have more disposable income.

The reality is somewhat different however. With stable home and work lives this particular demographic is regarded as relatively “safe” by lenders, who make plenty of “cheap” credit available to their customers. And the over-40s are more than happy to take it too.

Rather than reducing their debt burden, people aged 40-49 are more likely to increase it. In fact, they now carry almost 50% more debt than they did in their 30s. More surprising still is the finding that their personal debt continues to grow into their 60s too.

So although these individuals are typically better placed to pay down debt, according to the report the majority choose not to.

People still aren’t saving enough for their pensions

The government may have been trying to raise awareness of the issue, but the guide shows that the majority of people in their 40s have not saved much towards their pensions. And like salaries, the value of a 40-ish year old pension pot differs markedly between men and women – £18,403 against £15,753.

Despite someone in their 40’s having around 25 years left to contribute and to give their pension pot the chance to grow leading into retirement, a woman with an average fund on retirement will receive a pension of just £2,700 per year – assuming a 5% growth rate over 25 years. Men will fair fractionally better under the same conditions, receiving £3,200 annually. Even a non-expert can see that these sums are likely to be insufficient for a comfortable retirement.

More insights and advice

The report – The Good Guide to Finances at 40 – provides more details about these points, alongside practical information to help get your own money in order. Click here to download your copy now.

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.