29 May 2020
Throughout our lives, we often strive to follow in the footsteps of our mentors. More often than not, these mentors are our parents. They teach us about life, how to develop good manners, build relationships, how to deal with everyday challenges and how to handle money and finances.
But there are certain situations where we should not follow in their footsteps as it could lead to disaster. This disaster is following their retirement path.
Let’s explain. Your parents are probably from the silent generation (pre-war 1946) and baby boomer era. (born between 1946-1964)
• They lived and worked in an era where the cost of living was much lower. They could buy larger homes, nicer cars and afford a high-quality lifestyle, thus increasing their net worth.
• They didn’t need to save for retirement in their private capacity because they were still privy to corporate or union pensions with full benefits and receive their social security retirement benefits. - Wikipedia
• You are currently paying for their retirement through your social security contributions.
Your parent’s retirement system could therefore possibly not work in this modern age – it will fall short!
• You are going to live longer than them and will need more income for retirement. Pension plans are just not structured well enough to sustain extra retirement. They are normally based on 20-25 years max. you are looking at about a 10-year shortfall.
“A recent study conducted by McKinsey shows that pension systems in 22 countries are unlikely to provide the retirement income necessary “to replace average earnings.” – Forbes
• The social security system is not structured to support your longevity and it is predicted that by 2034 there will not be enough taxpayers in the system to support you. – Forbes
• Very few companies give full retirement benefits anymore.
• The cost of living is much higher, and your generation is spending more on living and maintenance expenses, leaving very little for saving. You are buying smaller houses and smaller cars, because the cost of living is eating away at your money.
• Global markets are much more volatile than ever before due to geo-political factors. Your investments need to be more robust and diversified than your parents’, to withstand the impact on investment returns.
You basically need to save more for a longer period, to afford the longer retirement that you are going to enjoy.
It is an ideal time to set up a meeting with your deVere Acuma adviser to relook at your retirement strategy to cover any gaps or possible challenges that could cause damage to your pension. [email protected]
Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser 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.