Is it too late to start saving for retirement at 60?

At a glance

• Retirement looks very different today. We often retire later, and many of us are living longer. If you’re 60, you could easily live another 30 years.
• If we’re living longer, there’s a greater need to have sufficient pension savings to fund a longer retirement.
• Having a range of assets to rely on as a pension will give you options.

‘When can I afford to stop working?’ It’s the question most of us start asking ourselves, when we reach our fifties or sixties.

There are now more families with several generations in retirement than ever before – making the need for financial planning even greater. None of us know for sure how long we might live – but the Office for National Statistics predicts that a 60 year-old man will live to an average age of 84 years old – with a one-in-four chance of living to 92.¹

Younger members of your family could well be looking at a one-in-ten chance of celebrating their 100th birthday.²

“Today, it's entirely up to you what retirement looks like,” says Tony Clark, SJP’s Senior Propositions Manager.  “You decide when to retire, if you want to keep working, or if you even need to keep working.“

“Retirement today requires a lot more thought – and forward planning.”  

So, if you didn’t start saving early, is it too late to build up any kind of retirement fund or pension if you’re 60?

Have I left it too late to start saving for my retirement?

The answer is no. Earlier is better, especially when you’re at peak earning capacity (probably in your early 50s), but it’s never too late to start planning your retirement,
whatever age you are.

When you’re considering your future, you simply want reassurance and practical advice that you’ll have enough funds to cover your expenses and enjoy a comfortable lifestyle after you stop working.

Why should I save money for retirement?

With – hopefully – many years ahead of you, it’s important to work out how you will fund them.  Having sufficient savings for retirement gives you the flexibility to pursue
hobbies, travel, spend time with family, and live later life to the full, knowing that your financial future is secure.

The Pension and Lifetime Savings Association’s latest figures from February 2024, show that a single person will now need £14,400 a year to achieve the minimum living standard, £31,300 a year for moderate standard of living, and £43,100 a year for a comfortable lifestyle, which includes a two week holiday in Europe and several UK mini
breaks.³

But growing older can bring with it other expenses, especially if you need social care or private health care, and need to self-fund. And if inflation rises sharply again and outstrips interest, your money won’t stretch as far.  

Is it worth starting a pension at 60?

“I’d say on balance yes” says Tony. “Especially if you haven’t got that much saved up yet. But I’d add some important ‘watch-outs’, which is why everyone should speak to a financial adviser before they open a pension in later middle age. “

Pensions are a long-term product and very tax efficient. They’re one of the main ways to save for retirement. So, even if you’re in your late 40s, it can be worth setting one up, since there’s still plenty of time to make the most of the tax advantages such as the tax relief added by the government on eligible contributions.

A pension can help you:

• Bridge a potential income gap. If you haven’t saved enough for retirement or anticipate a shortfall in your retirement income, starting a pension at 60 can help cover the period before you receive a State Pension.
• Take advantage of your employer’s matching contributions, which can boost your retirement savings significantly.
• Increase your retirement options. Pensions offer flexibility in terms of how you access the funds during retirement. Starting a pension at 60 can give you access to various options, such as taking a lump sum or receiving regular income payments, depending on your financial needs and goals.

The thing to watch out for, Tony explains, is the effect of charges if you open a pension in later life.

“All pension providers apply charges to their products – and if you start in your 30s you’ve a longer time to mitigate the impact of those charges, since your pension has much longer to grow. If you start a pension in your 60s however, the effect of charges on your contribution is magnified because you’re likely to be paying in over a much shorter period.”

How much should I save before retiring?

It’s difficult to say how much money you need before you stop work, because it really depends on what you want to do.

We tend to spend different amounts during different phases of our retirement – for example, a year spent travelling the world is likely to cost more than a year spent working part-time. You may also find your spending falls as you get older.

How should I start saving for my retirement at 60?

The key to stress-free retirement finances is building in as many flexible options as possible. A pension can play a very important part, but it’s not your only option.

Many people fund their retirement from a range of sources, including property, Cash ISA savings, Shares ISAs, earnings, state pension and private pension pots.

This can be beneficial, because money can be withdrawn from each of these in different ways; for example, ISA withdrawals are free from Income tax and Capital Gains Tax (depending on the type of ISA). A pension allow people to withdraw a tax-free lump sum at retirement age, while income from a rental property may be monthly.

And there may well be other options to supplement your income that you haven’t considered. “You might want to look at what else you could turn into an income,” Tony says. “That might be a hobby or a skill you have that you could market, or a room in your home you could holiday let.”

Why planning is invaluable

It’s not enough to have savings, you also need a plan – and that’s why it’s a good idea to seek financial advice. “A financial adviser can help you plan how to build up a pot
in a tighter timescale,” Tony says. “They can help advise on which type of savings vehicle will suit you best – ISA, pension, equity release* or another form of investment. And don’t forget most of us will receive some form of State Pension.”

“That way, when you do stop working, you’ll have a range of different choices of where and when you draw on those different funds.

Retirement – the start of a new chapter

Building up your assets for retirement is only half the story. It’s not just the savings that give you peace of mind, it’s having a financial plan that will last your whole life.

Get in touch

Whatever age you are, it’s never too late to plan for retirement. We can help you prepare for your future so you can enjoy your retirement years to the full. Speak to us today.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

* Equity release is a lifetime mortgage. To understand the features and risks associated with such products, please ask for a personalised illustration.

Cash ISAs are not available through SJP.

Sources

^1,2Life Expectancy Calculator, Office for National Statistics, accessed 24 September 2024.

³ Retirement Living Standards, Pensions and Lifetime Savings Association, 2024. All figures quoted were developed by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA.

‍