General News & Insights

A recently published study by Ipsos for the ING Group, ING International Survey Savings 2019, has cast some light on why it is so important that people take retirement planning advice early during their working lives.

The study found that 62% in the United States and 61% of people in Europe, are worried by whether they will have sufficient money in retirement.

Furthermore, only 30% of retired people in the US said they were able to maintain the same lifestyle they enjoyed pre-retirement, while only 24% of the non-retired said that they expected they'd be able to enjoy the same lifestyle.

When the Social Security program came into force in 1935 the official retirement age in the USA was 65, yet the average life expectancy was 61*. Nowadays, average life-expectancy is around 76 years** and can be much higher among educated, healthy-living individuals, especially women.

Increased life expectancy creates a need for greater retirement assets in order to ensure sufficient income during retirement and one consequence of this is the advent of later-life careers while another is the increased imperative to plan early and to ensure a diverse portfolio of assets.

It is easy to see why many retirement investors may be tempted by the prospect of timing the market: imagine if you could ensure that you only ever invested in stocks at the time when the market was rising and only ever sold at the time when it was cresting like a wave that is about to crash.

However, your chances of timing your trading to perfection are, in reality, likely to be comparable to predicting the jackpot numbers in the lottery and chancing your retirement savings in such a way is likely to be at best a risky proposition and at worst, a catastrophe.

The reality is that there is no scientific way to time the market. This is not to say that there are no strategies you can utilise in order to protect and grow your wealth, only that these are going to be less about timing and more about foresighted planning, i.e. investing early in order to enjoy long-term gains and having a well-diversified portfolio of retirement assets that is able to withstand the inevitable volatilities of the market.

A new report from the World Economic Forum (WEF) titled "Investing in (and for) Our Future", has outlined concerns that many of the world's retirement savers will outlive their savings by more than a decade.*

The WEF warns that overburdened state and private employee retirement plans are ill-equipped to deal with the pressures of ageing populations and new economic concerns, and says that retirees in six of the world's major economies – Japan, the United Kingdom, the United States, Germany, Australia, Canada and the Netherlands – risk outliving their retirement plans by, on average,8 to 20 years.

It also sought to highlight the plight of female retirement savers in particular, who, as well as living longer than their male counterparts, tend to draw on smaller pension pots.

Health savings accounts (HSAs) are an attractive and popular complement to the retirement plans of an increasing number of Americans. The Employment Benefit Research Institute (EBRI) reports that around 3 in 10 employees in the US are enrolled in HSA-eligible health plans.*

Although an HSA is not a retirement account per se, they are frequently a component of a retirement saving strategy as they can be used to cover qualifying healthcare expenses while also offering tax-friendly advantages, particularly if the account holder is able to compound the account's balance over years.

We recently reported on why it is likely that the Foreign Account Tax Compliance Act (FATCA) is likely to remain in place in the US in favour of the Common Reporting Standard, but pressure is mounting in a number of foreign jurisdictions for governments to act.

In France, a group of so-called 'accidental Americans', who are being asked by the IRS to pay tax on global income based on their citizenship alone, have already lobbied US Democrats and have now taken a discrimination lawsuit to the French court because they have been denied access to loans and banking services as a result of FATCA.

Every day in the United States thousands of retirement savers, whether they are Americans, resident aliens or non-resident aliens, reach retirement age and face the question of what to do with their employer-sponsored 401k. Do you leave your pension pot alone, or do you give it a stir?

Across the globe, governments, lawmakers and society in general are all beginning to realise that as human longevity increases, the need for action on retirement planning is becoming more crucial and a social imperative. Without action, America, along with much of the rest of the world, will soon see generations of people whose retirement years will be impoverished and where affording the basics in later life, such as housing and healthcare, will become a lifelong worry.

However, there are various bills currently doing the rounds in Congress that show there is serious intention to make big changes to retirement planning.