Irrespective of what country you are from and how you envisage your future there will be unavoidable fixed expenses ahead of you- holiday, insurance, tax, medical expenses, travel, utilities, house and car maintenance, birthdays, leisure…
If you are a non-smoker and you reach the age of 65 you are likely to live another 20 years to 23 years depending on whether you are a male or female.
In order to maintain a modest lifestyle on $50,000 a year of income you would need to have a lump sum of $1,000,000 dollars at retirement age.
This assumes you can achieve a 4% return on your assets and the inflation rate averages 3%.
Your Japanese bank account pays you a princely 0.01% p.a and your bank account in your home country, despite paying a much higher rate of interest in reality only pays a high nominal interest rate (one that does not take inflation into consideration) meaning that the AER (annual equivalent rate- the REAL rate of return) is often below the rate of inflation (Filipino Peso, Indian Rupee and Canadian Dollar being prime currency examples of this unfortunate phenomenon).
In spite of economic downturns, taxes, paycuts, unemployment, living and leisure expenses, children, mortgages and liabilities how do you expect to accumulate enough money to provide for yourself and your loved ones come the time, which comes for all of us, that you are unable or simply unwilling to work? We are here to point you the right way; most importantly when you didn’t know that you needed directions.
Government pension systems are also being put under historically untested levels of stress with armageddon-type forecasts across the UK, Europe and US.
• $52,909 for every person living in the U.S.
• $138,240 for every household in the U.S.
• 100% of the U.S. gross domestic product.
• 526% of annual federal revenues.
U.S. Census Bureau, Population Division, September 2013
The US, despite receiving the most exposure as a failing state support system is unfortunately not the only country with problems. The following is a table of retirement savings shortfalls by country, compiled by HSBC UK.
| Rank | Length of retirement expected (median, years) | Time when savings are expected to run out (median, years) | Retirement savings shortfall (years) | Retirement savings shortfall (% of retirement covered by savings) | |
|---|---|---|---|---|---|
| Global | 18 | 10 | 8 | 56% | |
| 1 | UK | 19 | 7 | 12 | 37% |
| 2 | Egypt | 11 | 5 | 6 | 45% |
| 3 | France | 19 | 9 | 10 | 47% |
| 4 | China | 20 | 10 | 10 | 50% |
| 5 | Taiwan | 18 | 9 | 9 | 50% |
| 6 | Brazil | 23 | 12 | 11 | 52% |
| 7 | Australia | 21 | 11 | 10 | 52% |
| 8 | Mexico | 17 | 9 | 8 | 53% |
| 9 | Singapore | 17 | 9 | 8 | 53% |
| 10 | Canada | 19 | 11 | 8 | 58% |
| 11 | UAE | 15 | 9 | 6 | 60% |
| 12 | Hong Kong | 17 | 11 | 6 | 65% |
| 13 | USA | 21 | 14 | 7 | 67% |
| 14 | India | 15 | 10 | 5 | 67% |
| 15 | Malaysia | 17 | 12 | 5 | 71% |
Over nearly the past 100 years, U.S. inflation (as measured by the Consumer Price Index) has gone up at an average rate of 3.21% a year. At that rate, prices double every 22 years. Therefore, if you are 21 years old, you are likely to see prices double twice by the time you reach the retirement age of 65. Because of the compounding effect, this means things will be roughly four times as expensive at that point (i.e., a $1 item would double to $2 in the first 22 years, then that $2 would double to $4 in the second 22 years).
So, if you are 21 now and think that $25,000 would be a reasonable amount of income in today’s dollars, you had better plan to save enough to provide $100,000 a year. Of course, given the average life span discussed above, you can also expect to see prices nearly double yet again during your retirement years.
If you weren’t born with a King’s wealth you’re going to have to plan, to build the castle.
Speaking with a highly trained and experienced Tyton advisor can help evaluate your finances objectively and without bias. Benefit from our repertoire of skills that can include cash and debt management, asset allocation, investments, insurance, retirement planning and estate planning strategies to ensure that you’re not missing out. We pride ourselves on being extremely good at what we do. You wouldn’t try to represent yourself in a court of law, nor would you try to school your children by yourself- not because you’re incapable- but because it’s a full time job and similarly unless you’re giving your finances and the market at-large all of your attention, day, month and year-out, then you could benefit from having professionals on your side.
Speak with a Titan advisor today to see if you’re doing all that you can do to remove some of the uncertainty of the future. Drop us a line on the Contact Us page.
