What to do when you haven’t saved enough for retirement

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If you find that the older you get, the more you worry about retirement, you are not alone. A global survey by ING found that 61 percent of people living in 13 European countries are worried about retirement.


That means nearly two out of every three people you meet is wondering how they will be able to cope when they stop working.


Despite this common fear, very few people are actively doing something about it in terms of getting the right information and actually saving/investing more towards retirement.


If you find yourself in this situation, you should know that you still have options and there are ways to improve your financial situation before you finally retire. You will find some helpful tips below and a winning strategy at the end.


But first, you must be dying to ask this question!



How Much Money Should I Save For Retirement?




This is one of the most common questions asked on the web and by our clients. After all, it is impossible to know if you are on the right track without a destination.


Quite frankly, this is not a straightforward question to answer because people and circumstances are different. However, we will kill the suspense by sharing a popular perspective.


The global brokerage firm, Fidelity, has provided a rule of thumb that aims to help people have a better idea of how much they should have before retirement. The firm suggests that if you want to retire by 67, you should have saved ten times your annual salary.


So, if you are 65 years old and are earning 70,000 euros a year, you should have saved 700,000 euros.  If you are younger, these are the amounts you should have saved: at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.


As scary (or comforting) as this may seem, there are many other factors you need to consider.


For example:


·      What kind of lifestyle do you want to have when you retire?

·      How many dependents do you have?

·      How much debt do you currently owe?

·      How long will the money last? (expected life span – retirement age)

·      Where do you plan on retiring?

·      What are you entitled to from the state pension?


When you factor in these different things, you will find that the amount you need to save could be grossly underestimated by this simple rule or substantially less.


While the amount of money you need to save is a hotly debated topic, what is absolute is the fact that you need to save. 


Another statistic revealed in the ING survey is that 27 percent of adults in Europe don’t have any savings. Fidelity’s recommendation assumes that you save at least 15 percent of your income from the time you are 25.


For various reasons, this is easier for some people to do than others. Whatever the case may be, you need to have at least saved something by now, and you are about to know why.




Why do I need to save for retirement?


By the time most people retire, they would have worked for nearly forty years. During that time, you would have gotten accustomed to a particular lifestyle, built certain habits, and possibly put off many indulgencies.


Perhaps your company sends you on trips in business class, you enjoy fine dining and enjoy opera. These things are not easy to give up.


Retirement age is meant to be the golden age, where you get to do with your time what you want, how you want. You can travel the world, buy expensive things or anything else you fancy.


The reality for most people, however, is not so.


Over half of the people surveyed by ING reported that their standard of living had reduced since they retired. 


According to the German Institute for Economic Research, nearly 17 percent of pensioners are at risk of becoming poor. You hear stories of pensioners not being able to afford a cup of coffee at a café.


The reason is most people don’t start thinking about retirement until it is very late. At which point, they haven’t saved enough and/or are depending on social welfare.


The problem with social welfare, however, is that it is not enough to maintain your standard of living.

What is the social welfare package for pensioners in Europe?


People usually retire after earning the most in their careers. The highest-earning age group is those between 51 – 65 years.


In other words, you would have spent 10-15 years at the top of your fields just before you retire. This comes with certain perks and a particular lifestyle.


For workers in Germany or France, the average disposable income (income after tax) for people in this age group is over 30,000 euros per year. The figure is the same in a few other countries across Western Europe, rising to as much as 60,000 euros per year in Switzerland.


This means that a couple could be earning over 60,000 euros a year before retirement, or twice that in Switzerland.


If the couple does not have any or sufficient pension savings, they will have to depend on the state pension, which is as troubling as it sounds. The minimum weekly state pension for an individual is £125 in the UK, £130 in France, and £155 in Spain (there is no minimum in Germany).


Even a best-case scenario of £500 a week (577 euros) will still leave the average retiree with significantly less than they were earning before they stopped working, and it certainly won't be enough to help you enjoy your golden years.



What happens when you don’t save for retirement?




1.     You can’t retire


Plain and simple. If you don’t have any retirement savings and your only recourse is the state pension, you can either risk becoming poor or keep working.


There is a growing number of people who don’t want to retire, but unlike the Wizard of Omaha, who loves his job too much to quit, many people can't afford it. Retirement should be an option, something you can choose to do without fear of going broke.


2.     Your family has to support you financially


Medical bills, care home fees, or even your mortgage are things your family or children will have to cover if you retire without enough money saved. This kind of financial pressure can strain relationships or force children to leave their parents to the State's care.


3.     You miss out on all you have been putting off until retirement


Who would have thought that having a cup of coffee and a piece of cake could be considered a luxury after retirement? That is just one of many grim scenarios that face people who fail to plan their pension adequately.


4.     You are forced to sell your dream home


Having spent 20-30 years paying off your mortgage, it would be sad to have to sell your house to move into a small apartment. While it makes practical sense to live in an easy-to-maintain home after retirement, it should be a choice.


5.     You have a lot of debt


Having to pay off student loans, car payments, a mortgage, or credit card debt is hard enough when you're working, let alone when you retire. This is a situation nobody should be in, which is why one of the first things a financial advisor would do is draw up a plan to settle your debts.


6.     You become miserable

People often wonder why retirees often seem unhappy. When you worked your whole life only to end up struggling to make ends meet and relying on the government, anybody would be grumpy.


As terrible as all of this seems, you can still salvage the situation. Even if you haven’t saved anything so far, there is hope for you yet.


Below are seven ways to boost your savings and give you the chance of a sweet retirement.




7 ways to boost your savings for retirement



1.     Start now


You may be behind schedule, but you can and should start now. You can either go by Fidelity’s recommendation of saving 15 percent of your income or try something more challenging to make up for the lost time.


Using a combination of savings and investments, you could end up pleasantly surprised with what you can accumulate in just a few years. Of course, the more time you have, the better, but there is no point dwelling on the past.


Just make today count.


2.     Contribute to a private pension


As we have established so far, relying on the state pension is not a strategy for success. You need to invest in a private pension plan or some other investment plan that pays you good returns after retirement.


There are many great options available, but you might need help choosing the right ones.


3.     Maximise your employee pension


One of the easiest ways to improve your pension is to contribute the maximum amount your employers can match. The minimum your employer can match is 2% of qualified earnings.


However, some employers can match up to 15% of your monthly savings. In essence, you will be saving 30% of your monthly income or twice the recommended amount.


If you can still top up your personal pension scheme (which is subsidised through the Retirement Savings Act and Retirement Income Act in Germany), you will be in a better financial position.


4.     Start saving automatically


One of the ways to make saving more manageable is to automate it. When you calculate how much money you need to survive in a month, you can automatically save or schedule the rest of the money.


There are a lot of apps that can help with this. Before you get tempted or even access your monthly income, part of it will go to your pension, another saving account, and an investment account.


5.     Curb your spending


Easier said than done, right? As hard as it might be, it is worth it and something you are capable of doing. However, this is easier with the help of a professional, which we will discuss in the last point.


6.     Diversify your income


Depending on how late you started saving for retirement or if you currently can’t save much, this might be the most important step. There are different ways to diversify your income.


a.     Get a side hustle – is there a product you can sell or a service you can offer during your free time? There are many books and tutorials that can teach you how to organize your time and launch a successful side hustle.


lucrative side hustle can help you make between 500 - 1,000 a month.


b.     Monetize your home – if you have extra rooms in your home, you can put them on Airbnb or contact a letting agency to help you. Furnished basements and garages can also be pretty lucrative. This is also an option for when you retire.


While the average person on Airbnb makes less than €5,000 per year, some super hosts make more than ten times that.


c.     Get a part-time job in retirement – if you feel strong enough, you can maintain a part-time job after retirement. This, combined with your pension payments, could be all you need to still fulfill some of your life goals.


7.     Speak to a financial advisor


The final and most important step is to speak to a financial advisor. A financial advisor or a wealth manager will help you establish how much money you need for retirement and help you develop a framework to meet those targets.


A financial advisor will analyse how much you earn and the most efficient ways to cut costs. Remember that the key to retiring is investing wisely, and a financial advisor will help you accomplish just that.


Contrary to what many people think, a financial advisor isn’t just for the wealthy. We have several packages that cater to clients of varying income levels. Our goal is to help you set and meet your targets the best way possible.







No matter where you are on your journey to financial freedom, there is still every likelihood that you can enjoy your retirement. However, the key is to start now.


The easiest way to meet your goals is to get help from an experienced and fiduciary financial advisor. Fiduciaries have your best interest at heart and will work to ensure you make the most of your life after work.


Are you ready to begin your journey? Start by inquiring about our free consultations.


Photo by Beth Macdonald on Unsplash


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