Retirement Savers rethink their Investment Plan

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Retirement savings aren’t a sure thing. It is almost impossible to predict how markets will perform over time. Yes, markets generally run in cycles, but global events are unpredictable. The best we can do is base our future projections on the history of the markets and what analysts recommend. A perfect example is the last four years when we experienced a pandemic, hyperinflation, war, and super economies at odds. The previous few years witnessed significant damage to personal finance and money.

A recent survey shows that Americans used to think that $1 million saved in a pension plan was the retirement ideal. They now believe they need $1.9 million to be financially secure at retirement. While each person’s retirement needs are unique and require help through individual planning with a financial advisor, it is a bit of an eye-opener for retirement savers.

Why have retirement savings expectations changed?

Basically, retirement capital has not grown as well as what was expected. Many pre-retirees are now concerned about their shrinking portfolios and the impact it would have on their retirement lifestyle. This has led to professionals rethinking their retirement plans and increasing their retirement goals to make up for the losses. Even younger professionals see the need for increased retirement savings or alternative supplements.

  • Markets are not performing well – Events over the last year or two have wreaked havoc on global markets, and they have not performed well to the extent that some investments even made a loss.
  • Capital shrinkage – Some investments ran at a loss, causing overall capital to shrink. This is especially the case with professionals nearing retirement age. Investment portfolios lost money, and general capital was less. This left many pre-retirees with less retirement income than they thought.
  • Cost of living increase and inflation – Things cost more, and inflation rose to all-time highs. It costs more to have the same lifestyle as before. Disposable income is shrinking, and many cannot increase monthly retirement savings contributions.
  • COVID and the looming global recession hit funds hard. – Many major funds battled to perform with all global economic turmoil and underperformed with sluggish growth. This, in turn, led to lower-than-expected earnings.
How to boost retirement savings

It’s not all doom and gloom for your money. There are still opportunities to make up the portfolio losses as markets rebound.

  • Tax-efficient savings – Tax-efficient investing is an excellent way to increase your overall retirement capital. 
  • Supplemental pension contributions – once-off contributions could boost retirement savings, or you could increase monthly contributions to make up the losses.
  • Private pension plans – A private pension can significantly boost retirement savings, and you can contribute to it even if unemployed or between jobs, thus avoiding the gaps associated with workplace pensions.
  • Diversified funds to spread risk and avoid losses – a significant factor in protecting capital is to ensure that your portfolio is suitably diversified to spread the risk of losses. 

Those with time to save can make all the difference by increasing contributions and ensuring their investments are diversified.

For those nearing retirement, don’t forget that state pensions are an excellent supplemental income to help bridge the gap. Alternatively, you might consider renting part of your home or starting a small part-time business for extra income.

If you are worried about how your retirement income may have been affected by the market volatility over the last year or two, then chat with your financial advisor to review your financial portfolio and make any adjustments to get you back on track with your retirement plan. 

Please note the above is for educational purposes only and does not constitute advice. You should always contact your 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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