Outliving Your Retirement – A Horror Movie in the Making

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Alarmingly, a recent survey shows that almost 60% of people feel that they will outlive their retirement, meaning they will run out of retirement savings. Being old already has its challenges, but being old and having no money, is even worse.

Why is There a Growing Concern Over Retirement Savings Shortfall?

  • Company pensions shift to Individual pensions: There is a drop in retirement confidence as the shift from employer and state / national obligation moves to personal obligation retirement. Gone are the days of defined benefit schemes (guaranteed income for life with increases and benefits) from employers. Many companies now only offer defined contributions schemes (pay out a total lump sum at retirement, which is the responsibility of the individual to reinvest and manage).  Individuals now need to take greater responsibility for their retirement and pension planning.

  • State of the Economy: With the unstable economy and severe market fluctuations, many retirement portfolios have shrunk or are underperforming, leaving retirement planning off track.

  • Increased Longevity: A major factor is that people are living longer as modern health technology is prolonging life. This means that retirement planning you thought was sufficient could run out when you reach the age of ninety-plus years.

What Can Be Done to Cover This Retirement Shortfall?

Most important is to see a financial adviser to assess your financial situation and see if your retirement portfolio is on track with its planning and make any adjustments.

A Retirement Calculator can help forecast what you will need to fund your entire retirement. It is usually based on historical returns data and works on averages. Of course, it is not 100 % accurate, but it indicates how compound interest works over time and can help set retirement goals.

  • Trim the Fat – Cutting some of your everyday costs can help boost your retirement savings contributions. We often spend our disposable income frivolously. You’ll be surprised how you could add an extra hundred or two hundred pounds a month towards retirement savings contributions just by being more aware of your disposable income spending, e.g. that Starbucks coffee or eating out for lunch every day instead of bringing lunch from home or buying on impulse and not need.  Nothing depletes a debit card quicker than a sale at a mall. We buy things we don’t need because they are cheap.

  • Try to Mitigate Tax – There are ways to mitigate tax before and during retirement. Various vehicles can help mitigate your tax liability, like moving your portfolio into a trust or using insurance wrappers and portfolio bonds, which leaves more money for your retirement. Your financial advisor can help determine the best tax mitigation solution for your retirement savings, as each person’s wealth portfolio is different and unique, and not every solution is suitable.

  • Increase Pension Contributions – Many companies match workplace pension contributions made by employees. The company must match the difference when pension contributions are increased to the max. This free extra pension contribution could make all the difference for retirement.

Avoid being the victim in your own horror movie. The reality is that we are living longer, and the chances are that we will not have enough to retire on. Chat with your financial advisor immediately to get a revised plan of action to boost your retirement savings.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.


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