· Educate your clients that this is one goal that must be taken seriously and thought of the moment one starts earning....
· This week, Money News threw up 5 interesting statistics where the American public is concerned.
· 46% of Americans have less than $10,000 saved for retirement
· 40% of baby boomers now plan to work until they die
· 36% of Americans say they don’t contribute anything at all to their savings
· 87% of adults say they are not confident about having money for a comfortable retirement
· Expected retirement age is up to 67 from age 63
· In India, we have data from HSBC’s The Future of Retirement programme to go by. The latter is an independent study into global retirement trends. This year it came out with its report “A new reality”, the eighth in The Future of Retirement series based on a survey of more than 15,000 people in 15 countries. Here are some insights from the India report as well as suggestions that you as an advisor will find useful.
· Fear as a motivation
· Almost half (49%) say that the prime reason for retirement saving is the fear of not having enough to live on later on in life. When asked which is the biggest fear concerning retirement, 54% say it is financial hardship and 43% worry about not having sufficient funds for health care needs and expenses. So it’s not surprising to note that 44% plan to continue to work to some extent even after retirement.
· Expect changes
· Be aware of how major life events affect saving for retirement of your clients. As most people will be affected by these events at some point in their lives, it is important for your investor to prepare in advance to minimise the detrimental impact on their retirement savings. Respondents listed buying a home, paying for a child’s education, the economic downturn, and having to pay for a dependent as the most significant life events that impacted their ability to save for retirement.
· Get real about your retirement needs
· Globally, respondents believe their savings will run out on average halfway through their retirement. That is a very frightful situation to be in. With life expectancy increasing, people need to be aware how long their money will have to last, so that they can take steps to avoid any shortfall. In India, most respondents on average expect their retirement to last for 15 years, but their retirement savings to last for only 10.
· Put your savings priorities in order
· Globally, 22% are not currently saving anything for retirement. A proper balance must be established between spending on short-term needs and saving for long-term goals such as retirement. Shifting priorities now towards longer-term saving can lead to a more prosperous future. Caution your investors not to be under the misconception that they will be able to get by on a much lower income: 98% said they need all of current income to stay comfortable in retirement.
· Plan for the future
· There is a direct link between having a financial plan and saving more. Globally, 44% say they saved more for retirement with a financial plan in place. In India, this relationship is even stronger with over half the respondents (54%) saying financial planning led to increased saving for retirement. Having a financial plan and just saving something, however small to start with, can make a big difference to retirement income in the long run. The respondents in India cited life insurance, cash savings and deposits, personal pension schemes, mutual funds, and stocks as the key components of retirement income.
· This article had originally appeared on 6th June 2013 on www.fundsupermart.co.in
· The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.