It is generally recognised that people are living longer than ever due to medical advances and general improvement in health and most people’s life expectancy has increased significantly over the last few decades.
The bad news, however, is that to enjoy those extra years means needing a level of income that is enough to fund the lifestyle that people would like to enjoy. Being able to enjoy rather than endure retirement requires individuals to plan and take action to achieve that objective.
Retirement planning is an often overlooked necessity for many individuals who believe that their government or employer will provide for their long term future.
Research reveals that this is all too often not the case and that most reach their retirement only to find that they have inadequate provisions.
The problem of long term planning is particularly compounded for expatriates, who generally have no “in house” company pension provisions and who are therefore left to their own financial future with no expert guidance. Expatriates all too often spend a lifetime moving from contract to contract only to realize that they need to start planning when it’s too late.
Being financially secure in retirement just doesn’t happen magically. It takes lots of planning, time and savings.
Some scary facts about retirement:
- More than 50% of persons do not have enough finances for retirement.
- 25% do not participate in their company’s retirement plan.
- The average person spends 20 years in retirement.
Here are some tips to help you plan correctly:
- Talk to a financial professional. Every few years, it’s a good idea to schedule a meeting with a financial planner to get a ‘check-up’. It’s just like a doctor’s visit, and you should really talk about your present situation and future goals.
- Save, save, and keep on saving. Make it a habit to save as much as you can.
- Learn your retirement needs. Retirement can be expensive. Learn from today how much you need to save for your retirement. Talk to a financial planner, or find an online retirement calculator.
- Take part in your employer’s retirement plans. If your company offers one, it is usually the best tool you can use. Talk to a financial professional for all your options.
- Learn about pension plans. If you have an employer or government pension plan, learn all the details.
- Keep your retirement savings off-limits. Don’t make a withdrawal until you retire, you might incur penalties and it will be a setback for realizing your goals.
- Get your employer to start a plan. If your present job doesn’t offer a retirement plan, ask for one to be started. Many times it isn’t a cost to your employer to start one, and it can help you tremendously.
- Learn about your government’s retirement plans. Every country has different plans some with special tax incentives, so learn what your country offers and plan accordingly.
Do your own research. Use the Internet, read the newspapers and magazines, talk to your friends, to find out as much as you can about retirement.
Q: When should I start planning for retirement?
THE ANSWER IS SIMPLE: as soon as you can. Ideally, you’d start saving in your 20’s, when you first leave school and begin earning. That’s because the sooner you begin saving, the more time your money has to grow. Each year’s gains can generate their own gains the next year – a powerful wealth-building phenomenon known as compounding.
Let’s assume you start saving at age 25, and put aside $12,000 a year for ten years, and then you stop saving – completely. By the time you reach 65, your $120,000 investment will have grown to more than $2,606,942.58, (assuming an 8% annual return), even though you didn’t contribute a dime beyond age 35.
Now let’s say you put off saving until you turn 35, and then save $12,000 a year for 30 years. By the time you reach 65, you will have set aside $360,000 of your own money, but it will grow to only about $ 1,359,398.53, assuming the same8% annual return, which is a difference of close to $1,000,000.
The important thing about retirement planning is to start now, it’s not about timing the market, it’s about time is spent invested in the market, it can never be too soon to start, and if you don’t start now, it may be too late.
To avoid a shortfall in your retirement savings, you need to keep your finances in good shape while you’re living or working abroad.
As an international professional you may be able to take advantage of the potential tax benefits with your savings and investments – and you could get better protection for your family.
Secured income for life
With an annuity, you exchange the capital value of your pension fund for a regular income for life. Once you buy an annuity, it can’t be changed.