Are confused about when and how and why and especially how much money you have and will need to retire comfortably? It turns out you are not alone. According to a report released this week, retirees around the world are not adequately prepared for the challenges of retirement.
The Aegon Center for Longevity and Retirement, based in The Hague, The Netherlands, is a collaboration of experts from businesses in Europe, the Americas and Asia. They poke with 16,000 retirees and employees in 15 countries and found that almost half those interviewed look to their governments to provide retirement benefits, either through a type of social security or government backed pensions. And they found that world-wide, we have a long way to go before there is true “retirement readiness.”
While I usually focus on the non-financial aspects of life after career, the fact that millions of people fear they will run out of money by outliving their savings and investments is a real concern. This study reveals that governments, pension providers, employers and individual retirees need to work together to help all of us achieve the financial and emotional security needed for retirement. The study hopes to start a public debate but also serve as a wake-up call to organizations and governments that we need new policies to help us save and stay active longer.
Because of the increase in longevity, the cost of funding retirement is more expensive for everyone, especially the most vulnerable in society, according to Catherine Collinson, of the Aegon Center. “Solving this equation for retirement security must be recognized as a shared responsibility. No single entity can solve it alone.” Government safety nets are shrinking as economic growth and increased longevity affects the population around the world.
According to the report, almost half of the respondents expect their retirement income to come for government retirement benefits, whether it is Social Security in the US or government pensions in other countries. Perhaps surprisingly, the percentage of people who thought governments should do less or more was mixed. Globally, 31% thought governments should increase funding, through raising taxes. Fifteen percent thought governments should reduce benefits, without raising taxes.
There were also mixed feelings regarding raising the retirement age to compensate for the cost of people living longer. In the US, 32% believe retirement age should increase with life expectancy. Yet, according to Collinson, “while raising the retirement age can pave the way to extend working years and continue saving for retirement, it can only be successful if employment opportunities are available to older workers.”
Many people think they will live for 20 years after retirement, but they may live even longer. This means one will need to work more years to be able to save more for those extra years of retirement. But there is an upside besides the increased savings. Working longer promotes active living and healthier aging, according to the report.
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The lack of progress in retirement readiness is the most obvious finding in the study. Too few people are saving or actually planning for retirement. There is a need for greater access to financial advice and planning tools as well as flexible and part time working conditions for older employees.
The Aegon study was undertaken to capture a picture of how ready people all over the world are for retirement in order to use the information to better prepare for the future. Actions will only change when attitudes change, so this report and ensuing dialogue is designed to help recognize the need and be the agents of change. Now that your alarm has sounded, it is time to go out and create solutions
