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Retirement Funds

Schroders: Savers face gap between retirement expectations and actual spending, income

Global savers expect to spend 34% of their annual income when they retire on basic living expenses — below the 50% they will actually require, Schroders' Global Investor Study 2018 showed.

Retirees globally continue to invest their income during retirement, allocating on average 19% of their entire retirement savings to investment vehicles compared to savers who are yet to retire, who expect that they will be investing only 9% of their savings during retirement, the survey found.

Also, retirees globally receive 61% of their final salary annually. In Asia, savers approaching retirement expect they will receive 76% of their final salary compared to the 59% that retirees actually receive. By comparison, in Europe retirees receive 63% of their final salary, compared to an expectation of 72% among those close to retirement, the survey found.

The survey also found that the disparity in perceived living expenses was most pronounced in the Americas, where people think they will spend 32% of their income once they retire even though the cost of living in the Americas accounts for 53% of retirees' incomes.

"There is a real danger that people globally are underestimating the proportion of their retirement income that will need to be allocated to basic living expenses and the amount of money they will need to live comfortably in retirement, particularly in the current environment of low returns and increasing inflation," Lesley-Ann Morgan, global head of retirement at Schroders, said in a news release.

Ms. Morgan added that "to avoid facing challenging financial circumstances on retirement, they need to recognize the need to start saving as much and as early as possible. Leaving retirement saving until you are nearing your 50s and 60s is likely to be too late to make up a savings gap. Perhaps as a result of not having enough in retirement, our study showed that retirees were continuing to invest, and this often represented a larger amount than they expected prior to retirement."

The study, which surveyed more than 22,000 investors from 30 countries, is available on Schroders' website.