Average life expectancy is increasing in OECD countries. Will your retirement income enable you to thrive rather than survive for two decades or more when you stop working? It might be time to review your situation with a financial adviser.
Huge increase in life expectancy at retirement
Figures from a recent article in The Economist show a significant increase in life expectancy for retirees in OECD countries. Across the board from France to Australia, Mexico to Spain people are living longer and spending more years in retirement.
Between 1970 and 2020, the average retirement for men across the OECD increased from 12 to 19 years and for women from 16 to 24 years.
Not only that but according to the OECD, ‘On average across OECD countries, remaining life expectancy at age 65 is projected to increase by 3.9 years among women and 4.5 years among men by 2065.’
Of course, increasing life expectancy is something to celebrate but a longer retirement is only a good thing if quality of life remains high. Falling birth rates and a shrinking workforce suggest that this will be hard to achieve for those relying on a state pension.
The old-age dependency ratio (the number of over 65s compared to the number of 20-65-year-olds) was one in five for OECD countries in 1990. By 2050, it will be one in two.
Faced with this demographic timebomb, governments around the world are raising the retirement age. It is not improbable that today’s graduates will be working into their seventies if they rely solely on a state pension. And when they do retire, state pensions will be at subsistence level, at best.
To thrive not survive in retirement, start planning now
If you want to choose when to retire and have financial security and freedom throughout your retirement, it’s up to you to plan ahead. Whether you are just entering the job market or nearing the end of your career, you should be putting money aside into a private pension. If you’re not already doing that, it is imperative that you start now.
Not only is it key to save but it is crucial to invest your savings wisely to maximise return and benefit from compound interest. How and where you choose to invest is important because unless your savings are keeping pace with interest rates, your wealth will be decreasing in real terms. In addition, volatile markets mean that diversification is imperative to minimise your exposure to risk.
Financial planning for the future is certainly a challenge right now but a professional financial adviser can provide clarity concerning your financial goals and how to achieve them.
Here at Infinity, our advisers use cashflow modelling software to crunch the numbers and provide a forecast such as this one, flagging up potential issues which threaten your future financial security.
This client – let’s call her Katherine – wants to retire at 60 however, with her current savings and projected expenditure in retirement, she will run out of money at 72 (indicated by the columns in red). Armed with this information, Katherine and her adviser can address this problem.
She could save more, take more risk for a higher return or make a compromise to retire later. An adviser can work through the different options and put together a financial plan aligned to Katherine’s goals and tolerance to risk.
If you’d like to gain clarity regarding your retirement goals and whether you are on track to achieve them, why not make an appointment with one of our professional financial advisers? Contact us for a free, no-obligation consultation.
Plan ahead now to thrive, not just survive, during retirement.
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