No longer can employees rely on government pension payouts or corporate pension schemes to allow them to live comfortably in retirement. Strong financial planning and investing for the future is imperative for anyone who hopes to enjoy their life when their working days are done.
Economic troubles run rampant in most developed countries, which puts in jeopardy government pension payouts, such as social security in the U.S. On the other hand, European countries may have to reduce, stop or increase the retirement age. The recent BHS scandal in the United Kingdom is a stark reminder that corporations are susceptible to bankruptcy, which can affect thousands of employees.
Building your own nest egg is a wise and prudent decision, as is the assumption there will be no outside help after you retire. Unexpected expenses are certain to arise in retirement, no different than what occurs in everyday living while we are working for a living.
The ultimate question is - do you know how much you need to save to provide yourself a comfortable retirement?
While working, you know you have a steady flow of cash coming in each month. But once you retire you might have to rely solely on your own funds. A person who lives to the age of 92 will rely on their retirement savings for 27 years. As you get older, the likelihood of expensive medical bills also increases. Factoring in the rising cost of health care provides another concrete reason why smart financial planning - and independence - are vital.
Take retirement seriously. Plan well in advance to ensure a comfortable retirement. Envision retirement as a long vacation taken after 30 years or so of hard work.
So what amount of money do you need to comfortably retire?
Here’s an example:
Your age: 45
Retirement age: 65
Your monthly salary: $10,000
You are putting away monthly: $1,000
Scenario 1: No interest on your savings
Putting your money into a savings account is likely to earn little to no interest in the current market. At this rate of savings, you’d have $240,000 for a retirement that starts at age 65.
You should plan to maintain or increase your standard of living in retirement as a reward for 30 years of working hard. Plan on traveling or taking up a sport. Making smart financial decisions now will eliminate financial worry later. In this scenario, you would need $120,000 per year minimum to enjoy retirement.
If you have saved $240,000 over 20 years. The saved amount will only last you 2 years if you consider your current annual income of $120,000...
Scenario 2: Minimum of 2% interest generated on savings per year = $310,000
At $120,000 a year, the saved amount will last approximately 3 years.
Scenario 3: 8.5% interest per year (the average over 20 years of the S&P 500) = $642,000
At a current annual income of $120,000 a year, the saved amount will last between five and six years, assuming you simply withdraw the money from the account and do not reinvest any of it. However, don’t worry, there’s a solution that will allow you to reinvest the saved amount and earn a comfortable fixed income per year. This option will allow you to earn income without cutting into your capital, which should further ease any financial worries and unexpected expenses.
Use online calculator to calculate the regular contribution.
What is the most optimal retirement income strategy?
Save as much as possible. Increase your savings to up to 20% or $2,000 per month of your annual income of $120,000 and place it in a retirement plan averaging 8.5% per year. That would generate a retirement nest egg of $1.2 million in 20 years.
Upon retirement, reinvest $1 million into a fixed income bond paying fixed interest rates between 7% and 12% interest. At 7% this would produce an annual income of $70,000 or $5,800 per month. And, you’d have peace of mind knowing that your $1 million was resting safely in an account and not losing value.
Use online calculator to calculate other interest rates, years and contributions.
What if you have less than 20 years until retirement?
If you are over 50 and need to start putting away for retirement, this is not a problem. There are plans that offer security on your invested capital to not reduce in value. At Crewinvest offers tax-free savings and retirement plans to choose from - 7 years, 10 years, 15 years and 20 years. These retirement plans would fit any situation.
Currently 10, 15 and 20 year contribution plans are available.
The earlier you start to saving the better off you and your familly will be once you retire.
If you have less than 5 years?
There several options on the market. The best option would be are bonds, notes and funds. Short-term bonds are available on the market. These bonds can be private bonds or listed on the exchange. Most family offices use bonds to manage their capital.
Contact us to find out what options you have.
Types of Savings and Retirement Solutions
Regular Contribution Plan
A popular Regular Contribution Plan is available where you can save on a monthly, quarterly, semi-annually or annual basis. This plan invests directly into the S&P 500. Read about S&P that why Warren Buffet thinks this is still the best investment.
The plan guarantees your capital to not reduce in value and earn an average return rate of 8.5% per year (the plan does pay a minimum interest rate as well, about this please contact us to find out more and how it works).
100% principal capital is guaranteed by HSBC
Choose between 7 and 15 year term. 10 and 20 year term will be available in March 2017.
Option to contribute monthly, quarterly, semi-annually, annually
Average return of 8.5% per year (minimum interest if offered, contact us for further details)
Participation in the growth of the S&P 500 Index
Security through the safe and private custody of assets
Ability to participate in the stock market growth without the downside risk