A recent survey highlighted by International Advisor and conducted by UK insurance provider Skandia indicates that people around the world may not be saving enough for retirement. While not expressly focused on expatriates, the UK insurance firm surveyed more than 440 "advisors" (presumably commissioned brokers who sell its offshore insurance-wrapped investment products) based in Hong Kong, Singapore, Dubai, UK, Europe, Africa and Latin America. Globally, the brokers reported a funding gap between how much their clients are currently saving and what they'll need in retirement. The largest difference was noted by Singapore-based advisors, who reported that 65% of their clients weren't saving enough. Nearly a quarter of all advisors surveyed believed their clients were waiting too late to start saving, and many believed that people simply did not know how much was needed to fund their retirement.
What can expats do to reverse this situation? First, run the numbers to get a better idea of how much you need to retire and what you'll have to save and invest in a low-cost, diversified investment portfolio to support that retirement. Run some stress tests to determine your chances of having enough if something goes wrong. If you think you are among the majority who may not have adequate savings and investments, consider the following options:
- Save more by cutting your current expenses.
- Plan to work longer if you can.
- Depending on your nationality and their availability, contribute to tax-deferred or tax-free investment accounts.
- Look for a lower-cost place to retire.
- If needed, consider purchasing an inexpensive immediate fixed annuity in retirement.
There are no easy answers to the retirement funding gap. However, having a realistic plan, getting started saving and investing early, using low-cost investment funds, and, if needed, using low-cost annuities can all help fill the gap.
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