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Retirement planning number one concern: Will you have enough money

Retirement is inevitable and concerns us all. Being well prepared for the retirement stage of your life, is firstly making sure you have enough financial resources to last you until the end of your life to allow you to enjoy it.

You have worked for over 40 years and have earned the right to retire without worries about the future, especially after spending a lifetime working towards financial independence.

Today, more people are not saving enough and starting too late. Even top earners may not be ready for retirement according to the new studycarried out. Additionally, more than 40% of millennials don’t have access to a retirement plan through their job, according to the Pew Trust.

Income poverty in old age due to insufficient retirement planning by both government and individuals is becoming an emerging priority. In some countries, your savings and the absence of a social protection system are usually not sufficient to guarantee adequate income security until the end of your life, increasing the risk of leaving you in a vulnerable economic insecurity situation with limited options for escape.

The risk of reaching income insecurity grows with age and health issues. Unless policies change to provide higher social protection, we are all under the risk of running out of money in our old age.

How much do you need?

This depends on your current income, standard of living, health, where you live and what lifestyle you would like to have when you retire.

Simply put, you need to aim to have access to the same amount in your retirement per year as your annual income.

If you are earning $100,000 per year, ideally you would like to have access to $100,000 per year in your retirement or between 80%-90% of your annual income. This would then ensure you to have the same standard of living as today. In your retirement, you would like to enjoy your time and be able to do the things you were unable to do during your working life.

Therefore, if you need $100,000 per year in your retirement and you retire at 65 and expect to live until 85 years old – you would need $2million.

Lets analyse further:

  • If you assume you can live on a minimum of $3,000 per month or $36,000 per year, you would need $720,000 if you expect to live until 85. What happens if you live longer or fall ill? In some countries, especially the US, the healthcare is very expensive and not paid by the state. Hospitals need your credit card details before they can treat you.

  • If you assume you can live on $5,000 per month or $60,000 per year, you would need to save $1.2 million.

Sources of pension

A pension is a way to save money for later in your life when you are no longer working. You may get:

  • A pension from the government

  • Money from retirement plans you and/or your employer pays for

A pension from the government may not be enough for you to retire. Therefore, having your own plan is crucial to ensure you do not run out of money.

Very early on, people were saving money using bank savings accounts which were offering a good interest rate. Today, savings accounts no longer offer that.

In the past, the world was a paradise for the savers. The motto is “those who save get more out of life”. This is still true, only now, you have to invest your savings, otherwise they will be eaten up by inflation. Today, we have no choice but to invest our savings in order for them to not lose their value.

In our next article, we will compare how much value is lost by leaving your savings in your savings account compared to investing in different low-risk investment products. Subscribe to our newsletter to receive the article.

In the 70s, people would get a fixed interest rate of 7% and even have seen 11%.

What should you do today? Leaving your savings in your savings account will no longer earn you an interest rate high enough to make your savings grow and allow you to live off your interest in your retirement.

Karl Heinz and his wife ask their financial advisor at their bank what they can do with their regular contribution plan that will be maturing. They need to place the money in order for it to earn interest in order to last them through retirement and not use up all their retirement funds. The advisor first needs to understand the risk they are able to take and based on that, recommends a strategy of investing in stocks and property bonds.

Karl understands that he does not have much of a choice. Leaving money on the account, he is losing purchasing power and must find a way how to generate income on his savings. (click here to watch the documentary).

It is never too early or too late to place your savings to earn a regular income.

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At Crewinvest, we recommend available products on the market that offer working professionals and retired people to earn a return on their savings with as little risk as possible. Depending on what you are looking for, you can select:

  • Regular contribution plan. This is a savings plan that runs for 15 years and provides a guarantee that your savings will not reduce in value, allowing you to save on a monthly, quarterly, semi-annually and annual basis. This plan invests directly into the S&P 500 Index, which is highly recommended by Warren Buffet as the best and most diversified portfolio for retirement savings. This can also be used to save up for child education, a purchase of a house or any other savings aim which requires a large lump sum. Contact us to receive more information on the regular contribution plan.

  • 12-month fixed income plan – this is a short term 12-month plan that invests directly into a firewood commodity business (GG Capital - click here to find out more) The interest of 11% to 13% per year depending on how much you invest and it is paid out directly to your bank account every quarter. At the end of the term you can redeem your savings or leave them in for another term. Contact us for more information on the 12-months fixed income plan.

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