We are all concerned about our financial future. Some of us have provident funds (pension plans) with our companies and others have the government pension plans. But how secure are they and will they provide enough money for our retirement?
In the recent past, we have seen airlines and other conglomerates going bankrupt, appropriating the pension funds for other things or making poor investment decisions. The latest one is Tata Steel that has a pension deficit of 700m GBP and further more members of the British Steel Pension Fund expect to see a reduction of 10% from their pension benefits.
Governments pension schemes are more reliable, but they may not provide a comfortable retirement to maintain and hopefully upgrade your lifestyle after you enter your much-deserved retirement.
So, what can you do to secure your financial future once the monthly paycheque stops?
Having your own savings and retirement plan will protect you against any risk associated with the company you work for or government.
By protecting yourself with your own savings plan, you will also make sure that the increasing cost of living and healthcare costs do not affect you in the future. When you retire, you would need to have the same budget per month available to you as your salary.
Most people, saving for retirement forget about health care cost. Why? Because their employer pays about 75% of the cost and the remainder comes directly from the paycheck.
During retirement, you are responsible for paying the health care premiums and out-of-pocket expenses. Raising health care costs is going to be a reality. For example, if you work and live in the US, the Medicare will only cover 50%-60% of your healthcare needs, and overtime premiums and out-of-pocket expenses will go up.
Let’s say you earn $5,000 per month. When you retire at 65 you would expect to live to a minimum of 85 years old, this means you need a minimum lump sum of $1.2m. If you are earning $15,000 per month as a captain or an oil rig worker, then you are looking at $3.6m upon retirement. These sums are based if you live for 20 years after retirement. Life expectancy today is growing and we are looking at 92 years old (27 years after you retire at 65), which brings the amount you need during your retirement if you wish to maintain your standard of living to $4.8m if you are earning $15,000 per month.
Starting Early. Even investing a small amount can bring results. Most professionals earning a minimum $5,000 per month, can afford to put $500 aside. This would be equivalent of going out to dinner a couple of times a month.
Put aside as much as possible! Best to have it deducted automatically from your account. This way you are not tempted to spend it. It is easy to say “tomorrow” or “next month” I’ll start, but this will affect you in the long run.
Make a monthly budget for yourself and family, and try to follow it. This way, you will know exactly what goes in and out.
Place your savings into regular contribution plans, capital protected and/or fixed income bonds. This will provide you with regular income on your savings and capital-protected funds will give you peace of mind that your savings will not reduce in value. Fixed income plans are lump-sum plans that are perfect for those who:
Have savings sitting and not working for them.
Retired professionals, who would like to get regular income on their savings. For every $100,000 invested you can get a minimum of $9,000 interest income per year paid out to you on a regular basis. This will allow you to receive income without touching your savings capital.
Regular contribution plans may help those of you who want to contribute on a regular basis (monthly, quarterly, semi-annually, annually). This way you will assign a portion of your income to your savings plan for better retirement planning management.
You can ask your financial advisor to recommend you some relevant product or contact us at email@example.com to see what is available. We are a financial advisory brokerage that works with fixed income and regular contribution providers.
Saving Solutions We Currently recommend:
S&P 500 Index Regular Contribution plan – this is a capital protected plan that guarantees your savings to not reduce in value and provides a minimum of 4% return per year or the S&P 500 Index return, whichever is the greater. Contact us to receive their factsheet and brochure.
Short-term 12-month fixed income plan – we work with two companies providing short-term lump sum plans:
12-month Firewood Savings Plan – this pays 9% annual interest every quarter directly to your bank account. Click here to read more about the Firewood Plan or contact us to receive the factsheet about how it works and how it is guaranteed. This Plan is provided by the biggest supplier of wood to the Finnish market and their existing clients include Shell, Ingarö Ved, Norrort Ved, ICA, Kaminexperten.se, JSP Trading and their network of over 100 end customers.
12-month Precious Metals Savings Plan – this pays 12% annual interest every quarter directly to your bank account. Contact us to receive the factsheet about how it works and how it is guaranteed.