Estimates suggest that income of currently working people may reduce in half upon reaching pension age. When asked what they would stop spending money on in such a situation, 44% of respondents said they would stop spending money on entertainment and leisure, 43% would stop travelling and 39% would reduce their expenditure in regards to clothes and footwear, according to results of a survey by Swedbank.
Unfortunately, the unfair reality we live in already shows that most pensioners are financially unable to afford entertainment and leisure. Only 33% of respondents would be prepared to spend less money on food and household goods (something residents currently spend the most money on).
«We see that residents of working age do not commonly compare themselves with modern age pensioners. Instead, they imagine their retirement full of excitement, travel and leisure. Believing that it would be possible to refuse certain expenses when having one’s income cut in half is like tightening a belt that is not there. The average pension is currently EUR 273 in Latvia, which is approximately 45% of the average income of people of working age in the country. Nevertheless, some residents, especially young professionals, still depend solely on the state pension system, hoping that it will be enough to provide them with a good pension. It is worth keeping in mind that their income may be cut in half when they retire. Eurostat data shows – Latvia had experienced one of the largest increases of the proportion of pensioners in Europe in the past 20 years. It is a challenge for the pension system and a reminder to every working person not to miss their pension and make preparations for their personal pension well in advance,» – explains Swedbank savings and Insurance Support Department product line manager Kristaps Kopstals.
Residents aged 25 – 55 would be prepared to reduce expenses on entertainment, leisure and travel in the event of their income being cut in half. Residents aged over 55, who are the closest to retiring, believe the first thing they would have to cut expenses on would be regular purchases of clothes and footwear, food and household goods and making savings.
92% of currently employed residents spend the most money on food and household products, followed by household utilities (74%) and transport costs (61%). The main portion of pensions of modern day retired people goes to food (93%), followed by household utilities (84%) and healthcare (67%), as reported by Swedbank.