Are you saving enough for retirement? Find out right now!
A lot of people rightly wonder if they are saving enough for their retirement. The media regularly indicates that there is a problem with pension affordability. To understand how this problem developed we need to go back in history.
Pension history:
The current pension system is based on the assumption that five to ten workers will contribute to support one pensioner. Up until 1990-2000 that system worked fine as the baby-boom generation (born 1946-1964) formed a wide tax-base to support the pensioners of that time.
Boomers:
The first baby-boomers, born after the war in 1945, have started to retire around 2010, when they reached 65 years of age. This process will continue for the next 20 years!
Why? In 1961 the anti-pregnancy pill became widely available. The amount of children born dropped significantly and has been dropping ever since in most of the developed world. As a result of this the amount of workers able to support the increasing number of baby-boom generation pensioners has reduced drastically. In fact, so drastically that in the near future it is expected that just two workers will support one pensioner.
Thus, it is fair to say that the problems have only just started. An additional factor is modern science and healthier lifestyles which result in longer life expectancy of pensioners. This can easily be the final nail in the coffin of the current pension system as we know it.
Consequences:
A perfect storm is developing as pensioners live longer and fewer than ever workers support their pensions and healthcare costs. Governments are trying to come up with ‘solutions’ such as extending the pensionable age and increasing taxes.
At the same time employers prefer to hire young staff instead of ‘old’ and ‘expensive’ 50+ year olds. Yet, if you don’t contribute to your pension until you are 65 your pension will be reduced in retirement.
Solutions:
The solution to all this ‘doom & gloom’ is simply. It is called ‘Look after yourself’. Once you accept the fact that you need to look after your own retirement life becomes a lot easier. First of all from now on you set your own rules. No more dependency on governments whom, as we know, only think 4 years in advance, if you’re lucky.
Second benefit is that the money that you set aside for your retirement stays within the family as it will form part of your estate. Why should your pension fund die together with you?
You also set the rules regarding the investment strategy of your plan. This allows you the flexibility to pick exactly those assets you feel comfortable enough with when saving for retirement. You set your own rules as to how much you wish to draw down from your fund. Should you need more income for a short period of time or make a large single purchase you can access that money.
Use the below calculator for three different types of calculations:
- You have some money set aside for retirement. How much income can you generate per month for a set number of years
- This calculator is the opposite of #1. You have an idea of the income you need, but would like to know how much your pension fund has to be to support such an income for the time period chosen
- For the last calculator you know the fund size and your desired annual income. The calculator shows how many years your fund will last you
Check out the sections on regular saving products to learn about the solutions that will help you achieve your goals in a comfortable way. We explain how the product work in normal language, show you the key-differences between the common offered products and point out the common mistakes that can cost you thousands of dollars when setting up a plan.
For a personal calculation on saving enough for retirement please reach out to one of our specialists us!
