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Prepared for Retirement?

Retirement Savings to Run Out

Written by Swagato Chakravorty
Posted February 25, 2013 at 6:25PM

A new study by HSBC suggests most people simply do not save appropriately for retirement—we’re talking about millions of people.

Roughly 20 percent of people worldwide aren't saving at all, and millions—more than half the world’s working population—isn’t saving adequately. Considering all the pressures exerted by the dismal global economy and ongoing recession on household incomes, this is a sorry state of affairs.

CNN reports:

"People are living longer, through tougher economic times, but expectations about their standards of living in retirement remain unchanged," said HSBC Head of Wealth Management Simon Williams. "As a result, millions of people around the world are facing years of hardship after their savings run out."

What’s most telling are the numbers: people expect, on average, that their retirement will last nearly two decades, but they also expect their savings to run out in half that time.

The HSBC survey focused on 15,000 working and retired people across 15 nations, with the participants asked for their own figures as to length of retirement, savings, and other such expectations.

Nearly half of those who stated that they have not saved for retirement pointed to the disparity between the world’s economic conditions and the rising cost of living as a major factor. Also, a majority of the survey respondents indicated that some major event—a child’s education, a health incident—caused major problems for their savings.

In the U.S., survey respondents expected retirement to last around 21 years on average but expected savings to deplete after just 14. Tellingly, that is the same proportion of savings-to-retirement as reported by respondents in India.

The Brits are quite dismal about their retirement prospects. They expected retirement to last 19 years, with savings running out after just 7. In general, the survey indicates that Western respondents favored short-term pleasures (vacations and the like) while Asian respondents held a longer view.

Another recent survey conducted by Ameriprise Financial indicates that nearly 72 percent of presently working baby boomers foresee delaying retirement because they don’t have enough to retire on. Just 46 percent of these working baby boomers claimed investable assets of at least $100,000, and thus could feel comfortable enough about retirement.

From U.S. News:

"It can be difficult for individuals to envision a future that is undefined," says Suzanna M. de Baca, Ameriprise's vice president of wealth strategies. De Baca describes the average pre-retiree as a "deer in the headlights" when they try to picture their financial stability in the years ahead. However, de Baca says worries about funding retirement make up only a fraction of the anxiety most people nearing retirement experience.

Globally, the average retirement length seems to be 18 years with average savings lasting for about 10 years (according to the HSBC report). The U.S., for example saves about 67 percent of income for retirement purposes—compare that with Malaysia’s 71 percent and the U.K.’s 37 percent.

The Huffington Post presents an interesting finding:

"The most surprising finding was that in spite of the inadequate state of retirement savings globally, when asked to choose, almost half of pre-retirees (43 percent) are willing to prioritize saving for going on holiday over saving for retirement," [Executive VP, HSBC retail banking and wealth management, Andrew] Ireland told Huff/Post50.

Almost certainly, though, retirement is not an issue that is taken seriously enough, given the dire straits of present. 57 percent of the survey participants clearly indicated that they fear financial hardship in retirement, and 46 percent stated they are concerned about not being able to afford proper healthcare just when they are likely to need it the most.

It’s a mix of things. People are living longer thanks to better medical care, which is pushing retirement ages higher, which is delaying the next generation’s entry into the workforce, all of which is compounded by the worldwide economic turmoil and conflicts over healthcare.

The real problems won’t be seen when the baby boomer generation retires, but may in fact take a generation more to become apparent. At most risk, of course, are those who cannot save at all due to a variety of factors.

Yet, almost a third of the survey’s respondents stated that they would rely on the state for retirement income. Just how that’s supposed to work when government spending cuts and austerity measures are all the rage is unclear.

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