29 Mar Retirement Is Not The End of the Road, IT IS THE BEGINNING OF THE OPEN HIGHWAY
Retirement is a topic that regularly makes headlines, and not all of them are encouraging. People are living longer than ever before. However, if you assume most people are saving more to prepare for their longer-term needs, you are mistaken.
Here are some of the more startling truths about retirement.
You can increase your chances of becoming a millionaire if you implement these five money habits:
- The post-career phase of your life could last a quarter-century or more
- State pension benefits alone are not enough to ensure a comfortable retirement.
- Almost half of all people have no personal retirement plan savings whatsoever
- Medicare will not cover the costs of assisted living or a nursing home.
- To make sure that you are saving enough, try to max out contributions to your employer-sponsored plans if they are available.
1. It Could Last Longer Than You Think
The average person will retire at age 67 and live until nearly 85. However, for many, retirement will last much longer than 18 years. The numbers are skewed by the number of individuals who die relatively young.
Consider this: A 65-year-old woman has a 50% chance of making it to age 86.5, and a 65-year-old man has a 50% chance of reaching age 84 (as of April 1, 2020) That’s why younger workers need to plan for two decades or more of income in retirement. And for current retirees, an ultra-conservative portfolio composed solely of bonds may not provide enough growth, especially with interest rates still near historic lows.
“While portfolios exclusively or primarily composed of bonds may seem safer than stocks with potentially lower downside risk short term, historically they have provided significantly lower overall returns long term. This can be cause for great concern about keeping up with inflation or meeting desired asset projections for satisfactory income later,”
“A broadly diversified retirement portfolio consisting of 40% large-cap stocks, 25% small-cap stocks, 25% bonds, and 10% cash has had a 98% success rate in lasting at least 25 years during retirement before running out of money.
Diversification is a lifelong investing guideline—stay diversified in retirement too,”
2. State Benefit Falls Short
A lot of financial advisors recommend replacing 80% of your usual income once you hit retirement. Most of the time, State pension payments alone won’t be nearly enough to hit that target.
In the UK, the weekly State pension benefit in 2020 is only GBP 175.20, which comes out to GBP 9,110.40 per year
(35 years of National Insurance contributions are required to achieve this level of payment)
We can talk you through the process of making voluntary contributions whilst working outside the UK.
“One of the big issues with state – related pensions is that it only provides a similar standard of living for those in the lowest quartile of income earners.
That’s why it’s so important to start saving while you’re young, using tax-advantaged vehicles, which are available to you while living as an expat.
The right tools can help you Save Money & Time,”
3. Why Are People Way Behind on Savings
“Between two stock market crashes and not saving enough in the last 16 years, coupled with increased expenses and inflation, people are falling very far behind on saving for retirement,”
As the Worldwide workplace turns away from providing pension plans, the onus is increasingly on workers to secure their retirements. The fact is, though, relatively few succeed.
In the UK, the number of individuals contributing to a personal pension has increased to 10.4 million in 2017-18. This is the highest level since these statistics began; higher than the 9.4 million seen in 2016-17.
4. Many Are Staying in the Workforce
Given the fact that so many people are behind in their savings, perhaps it’s not surprising that many remain in the workforce well after reaching State pension eligibility.
According to the latest Office for National Statistics figures, just under 1.2 million people over the age of 65 were in work – or 10.2% of the entire age group. That’s out of a total UK workforce of 32.3 million in the UK.
Now for Some Good News
While it seems that every week a new study or survey is released that emphasizes how woefully unprepared people are, other research suggests that the retirement outlook may not be as bleak as it seems—both in Americans’ attitudes and in the action they’re taking.
Here are some fun facts:
- Six out of 10 workers say they feel fairly confident or somewhat confident about being able to enjoy the kind of retirement they want.
- 57% of workers say saving for retirement is their top financial priority.
- 62% of workers expect their standard of living to stay the same or increase in retirement.
- More than one-third of households owned an individual retirement account
How to Get on Track
Depending on how much progress you’ve made toward your own retirement goals, you may be feeling better or worse about where you stand. If you’re not quite as close to your target as you’d like to be, taking a second look at your retirement plan can help you pinpoint the gaps.
Start by trying to figure out just how much you’ll need for retirement, based on your current spending and the standard of living you want. Then look at your savings balances and how much you’re saving regularly.
We can run an analysis on this for you to help identify your current status.
Over half of the people we have as clients (55%) build their nest eggs using a regular savings vehicle.
Glenn Emms is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives, or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Glenn Emms is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.