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Renting can raise cost of retirement
15 April 2008 12:00
People who fail to get onto the property ladder can find that renting significantly raises the level of income they need to live comfortably in retirement, a new report has warned.
With the typical borrower paying off their mortgage by the time they reach 48, Friends Provident's study showed that whereas the average homeowner needs just £3,020 a year to maintain their property in retirement, a renter would require £11,491 annually.
It found that a 23-year-old would have to save £40 a month to maintain a fully owned property after giving up work, while a 33-year-old would need to set aside £65 a month, a 43-year-old £115 per month and a 53-year-old £280 per month.
By contrast, someone aged 23 who planned to rent in retirement would need to put away £150 a month to be able to afford this, while a 33-year-old would have to save £250 a month, a 43-year-old would need £450 a month and a 53-year-old £1,050 a month.
Friends Provident's Jeremy Ward warned that while renting can be a difficult cycle to get out of due to the initial costs of buying a home, people expecting to rent in retirement need to accommodate the extra income that this will require into their pension planning.
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