If you’re looking to make an impact in 2025, why not make a truly life-changing New Year’s resolution this year: to start planning for a comfortable and secure retirement? We look at some key points to consider.
Why planning for retirement should be this year’s resolution
Another day, another survey revealing a looming retirement crisis. This time it is Blackrock UK’s Read on Retirement 2024 survey which reveals that only a quarter of those surveyed feel that they are on track for a reasonable standard of living in retirement.
The participants of that survey all have a defined contribution pension which means that they are already saving for retirement. However, the retirement benefits are not guaranteed and depend on the investment performance of the funds contributed.
That leaves 75% of those with this type of pension concerned about their retirement savings running out. Not to mention those that aren’t saving at all.
Are you concerned about your retirement savings running out?
Have you yet to start saving for retirement?
If your answer to either of these questions is yes, you should make planning for retirement a priority.
Are you ready to make a truly impactful New Year’s resolution for 2025? If so, we’ve got some advice.
If I could turn back time….
It’s a lament we hear from many millennials and GenXers right now, as they start to see retirement looming on the horizon. Sadly, you can’t turn back time, but you can start now.
If you’re lucky enough to be part of Gen Z, don’t think this doesn’t concern you! Time is the most critical factor in retirement planning. Starting early will mean that you avoid the mistakes of those from older generations now struggling with retirement savings. You can plan ahead and benefit from the hefty boost decades of compound interest will give your savings.
Whatever generation you are from, if you’re determined to change the course of your future and improve your retirement prospects, you need to save. Here are some tips on how to do it.
A recommended savings strategy: dollar cost averaging
Dollar cost averaging is an incredibly simple but effective investment strategy. It simply means that you invest on a regular basis, regardless of what the markets are doing. When prices are low, you get more for your money and when they are high you get less, but over time the average cost per unit is lowered.
This approach reduces the impact of market volatility. Numerous studies have shown that investors who stay invested through market cycles with diversified portfolios (more on that later) have the highest probability of positive returns.
Dollar cost averaging also establishes a savings habit, which is important as consistency is key in building a liveable income for retirement.
You can simplify the process by automating savings as soon as you get paid each month. It can feel tough at first but after a while, you’ll adapt your budget and spending to compensate and you won’t even notice the difference.
Watch out for the silent thief: Inflation
Savers and investors need to keep a constant watchful eye on inflation. It’s not called the silent thief for nothing. If your savings are earning a lower return than the rate of inflation, you will be losing money.
Choose carefully where you invest and beware especially of keeping unnecessarily high bank deposits. If you are holding too much in cash, you are missing out on wealth-generating opportunities. Over the long term, it’s savvy investing in the stock market that will give your money the best return.
Getting your asset allocation right
Asset allocation is one of the most critical decisions you’ll make in retirement planning. It refers to how you divide your investments among different asset classes, such as stocks, bonds, and cash.
The goal is to find the right mix that balances your appetite for risk with the potential for returns while keeping your timeline to retirement in mind.
For younger investors with decades until retirement, a higher allocation to stocks is generally recommended. Stocks tend to offer higher growth potential over the long term, allowing you to take advantage of compound interest. As retirement approaches, however, shifting a portion of your investments to bonds or other lower-risk assets can help preserve your wealth and reduce exposure to market volatility.
Diversification is key here: spreading your investments across various sectors, regions, and asset types helps reduce risk and increases the likelihood of steady returns.
Need help with retirement planning?
This may all sound very complicated, but it doesn’t need to be. Our financial advisers here at Infinity are here to help you:
- Work out your retirement goals
- Define a suitable monthly savings goal
- Assess your tolerance to risk
- Advise on suitable investments based on your risk profile
- Optimise your asset allocation
- Review and rebalance your portfolio as necessary
- Help you keep on track for a worry-free and financially secure retirement
If that sounds like exactly what you need, why not contact us for a free, no-obligation consultation today and finally get your finances sorted in 2025!
A leading provider of expat financial services and wealth management services across Asia.
