Enabling and inspiring habitual saving is a key part of retirement solution. To make this a reality, the Aegon Retirement Readiness survey finds that future retirees need to take greater responsibility for planning their own retirement and that they need better information and educational tools. Improvements in retirement literacy are required for people to make better long-term decisions and wisely exercise their personal responsibility.
The findings of the survey are based on the responses of 14,400 employees and 1,600 retired people from 15 countries.
The survey says that globally, a worrying proportion of workers (38% including India) have no retirement strategy for their future retirement. Moreover, vulnerable groups, in particular, are unlikely to have taken the step of putting their retirement strategy on paper or indeed having one at all. For example, almost half (49%) of those with a low personal income do not have any type of strategy compared with 22% of high-income earners.
Workers with a strategy for retirement tend to be more realistic in preparing for retirement, expecting to live longer in retirement than those without a strategy. They also are more likely to save habitually, feel a greater sense of responsibility for their retirement income, and have a higher ARRI (Aegon Retirement Readiness Index) score.
While formalized retirement savings strategies create a plan for income in retirement for the majority of seniors, there will always be a portion of the workforce who will be unable to work until retirement age. Thus, a backup plan is important to help ensure a minimum income throughout retirement, even when unforeseen events occur.
Yet in this context, it is concerning that almost two in three people (almost 58%) do not have a backup to provide an income if they are unable to work until the planned retirement age. Of those who do have backup plans, their savings and their spouse’s income are top components of those plans.
The need for people to create a plan for retirement is both clear and growing, especially given that each generation is expected to take on greater levels of responsibility for their long-term financial security and potentially live longer in retirement. A new template for planning can help to direct people with regards to their retirement savings plans and help set them on the best course of action. This template should also help to make retirement planning part of people’s everyday lives.
The survey recommends retirees to focus on cash products, diversification and asset allocation. “In addition to planning and saving, people need to invest wisely for the long-term to help ensure that their savings last their lifetime. The requirement to do so is intensifying as individuals are taking on greater levels of responsibility for their own long term financial security. There is constant reliance on savings accounts as a possible route to retirement security. Even more concerning, the reliance on savings is replicated when we look at how people devise their backup plans, which are supposed to provide for them when unexpected events blow their finances off course. The high usage of savings accounts to prepare for retirement suggests that people may need more help with asset allocation and diversification.”
