With the pandemic causing so much uncertainty, making sure your finances are “retirement ready” may be the last thing on your mind. Yet, taking the time now to plan may ensure your financial security long into the future.
Aegon has said it before and it bears repeating: the traditional social contract among governments, employers, and individuals to provide retirement security for people as they get older is under severe strain. The reasons for this include the pressures of people living longer (longevity), population aging, globalization, and evolving employment trends that are being acceleration by innovative technology.
Therefore, Aegon has for several years been calling for a New Social Contract that would ensure all individuals have the ability to retire with dignity. Such a contract would be based on the principle of solidarity. This requires collaboration among policymakers, industry, employers, nonprofits, and academics to modernize retirement systems in a way that is sustainable and adaptable for the future.
Sounds good. Does this mean that you and I can sit back and wait for officialdom to sort out a financially secure retirement for us all? No. As Aegon's New Social Contact series of reports makes clear, individuals are increasingly expected to self-fund a greater portion of their retirement income. Yet relatively few of us are equipped to do so on our own, and we realize this. Workers globally expect they will need on average 67 percent of their current income in retirement, but only a quarter (25 percent) believe they are on course to meet these needs.
The COVID-19 pandemic has made this complex situation even more fraught and has added additional anxiety we could all do without. The good news is that it really helps to have a personal plan, ideally supported by advice from an employer and/or financial adviser.
According to Aegon's research focused on the role of age-friendly employers, sixty-two percent of workers who receive financial advice as an employee benefit have well-developed personal retirement plans. And 57 percent feel that they are saving enough for their retirement.
Aegon's report - The New Social Contract: Age-Friendly Employers - illustrates how help can be found in the workplace. "Employers can create an environment where saving for retirement becomes habitual and workers are nudged into making choices that will help set them up for financial security in the long-term" says Mike Mansfield – Program Director Aegon Center for Longevity and Retirement.
But only 17 percent of workers are retirement "strategists", meaning that they have a written strategy. And only 35 percent of workers have a backup plan in the event they are unable to continue working before they reach their planned retirement age.
"Employers can create an environment where saving for retirement becomes habitual and workers are nudged into making choices that will help set them up for financial security in the long-term."
Mike Mansfield – Program Director Aegon Center for Longevity and Retirement
The five fundamentals for retirement readiness
When and how to get started on your financial planning? The when is easy: there is no better time than now. The start of a new year is a perfect opportunity to start making profitable changes in your financial readiness.
To help get you started, Aegon sets out the Five Fundamentals for Retirement Readiness that define steps people can and should take to help ensure that they are on track for a comfortable retirement. They involve different aspects of saving, planning, and preparing for longer lives and older age.