There’s a significant gap between how much people are actually saving for retirement and how much they think they need to be putting away, according to a new survey by Schroders.
The survey, which questioned 22,000 investors from 30 countries, found that people in every country, except for Denmark, reported saving less than the amount they need to be contributing in order to have a comfortable retirement. Respondents in Denmark saved too much, putting away 13 per cent of their income, on average, compared to the 12 per cent they feel they need to contribute. Chileans are also saving 13 per cent, on average, but they feel they’ll need to put away 19 per cent of their income. Canadians’ disparity is just two percentage points, with respondents saying they’re saving an average of 12 per cent of their income, while they feel they’ll need to put away 14 per cent for a comfortable retirement.
Globally, survey participants are also underestimating how much of their retirement income they’ll spend on basic living expenses. Overall, they said they’d spend 34 per cent, but in reality, they’ll likely need nearly 50 per cent, according to the survey. Canadian respondents said they’d need 42 per cent, whereas the survey found they’d actually need 59 per cent. The biggest gap in expectation versus reality is in South Africa, at 34 per cent and 59 per cent, respectively, while Indians are much more in tune with reality, at 26 per cent and 25 per cent, respectively.
“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,” said Lesley-Ann Morgan, global head of retirement at Schroders, in a press release.
“There is no magic wand for people. To avoid facing challenging financial circumstances on retirement, they need to recognize the need to start saving as much and as early as possible,” noted Morgan.
While 88 per cent of Canadian respondents said their retirement income is sufficient, those in India are much more optimistic, at 99 per cent. South Koreans feel the least prepared, at just 45 per cent.
As far as finding information on making investment decisions for retirement, the top resource is individual research from third-party sources, followed by financial advisors, pension providers, regulators or government agencies, friends, families or colleagues and employers.