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20 Feb 2013

Retirement: a reality check

Simon Williams

by Simon Williams

Group Head of Wealth Management, HSBC

Retirement: a reality check

Many people are still not saving enough for old age – and the shortfall has got worse following the economic downturn

The past five years have not been helpful for those who aspire to a happy and prosperous retirement. Many who thought they were saving enough have had to think again after the global economic downturn and the low interest rates for savers that followed. Those who were not saving enough look even more vulnerable.

This is a global problem. Our latest independent report, The Future of Retirement: A new reality is based on research from more than 15,000 people across 15 countries. In old age, they want more time for family, holidays, hobbies and charity work. But there is a huge gap between their aspirations for old age and the reality. Put simply, most people need to do more if they are to achieve their hopes.

The world’s population is ageing. By 2050, the United Nations predicts about one in five people will be retired. Our research shows that people expect retirement to last for an average of 18 years. Yet, on average, people expect their savings to last for just ten years, leaving an eight-year difference. This is a cause for concern as the second half of retirement is often when health and care costs rise.

Perhaps the most worrying finding is that nearly half of all those surveyed have never saved for retirement

Many people are still not saving adequately for old age – and the shortfall has got worse. The economic downturn has affected the level of retirement savings for one in four people, storing up problems for the decades to come.

Many of these people expect to rely on the state. This creates problems for governments. It will put an unsustainable strain on public healthcare, transport and housing provision.

Achieving retirement aspirations may remain a dream that for many is not realised, unless they save more. People told us that, to continue a comfortable standard of living in retirement, they would need 78 per cent of current income. But most people’s actual savings levels are unlikely to generate this amount of retirement income. And although most are worried about their health in old age, they do not plan for the costs of medical and long-term care.

What is the solution? There is no easy shortcut and the answer for each person may be different. Some may work for longer, others may eke out their savings. The better you plan and the more you save, the longer the retirement you can afford.

Concerns or fears for retirement
Financial hardship 57%
Poor health                                    54%
Not enough money for healthcare 46%
Inability to realise aspirations       31%
Loneliness 28%
Loss of memory 27%

Source: The Future of Retirement: A new reality.

People need to take a new approach to planning that is robust enough to withstand setbacks. Putting even a small amount aside for the long term can make a major difference. Retiring later may be part of the solution. Though some will find this unwelcome, our study found significant numbers willing to work on in some capacity post planned retirement age.

Retirement issues are a challenge for individuals, families, employers, governments and society. Better planning, more saving, a wider awareness of the issues and a willingness to address them will help overcome the problem.

Understandably, people have mixed emotions about growing old. They are concerned about life expectancy, health and having enough money for their needs.

Many also have exciting aspirations for later life. Most put time with their family and friends first, followed by frequent holidays and travel. Some aim to work for charity, some to learn a new skill, and there are remarkable numbers of aspiring writers.

Realising these hopes will be possible only if they have planned adequately. The prize is great – a better and happier old age for hundreds of millions of people.

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