News about retirement

I recently came across this news report at the Philippine Daily Inquirer website. It's very informative and I think this should be read by everyone.

Prepared for retirement? Think again

By Daxim LucasPhilippine Daily Inquirer
First Posted 00:20:00 07/06/2009

MANILA, Philippines - It doesn't matter
how old you are, but if you thought last
year that you’re all covered when your
retirement time comes, you might want
to think again.
Given the financial upheaval caused by
the global economic crisis, UK-based
banking giant HSBC believes that a
“perfect storm,” of demographic,
individual and financial elements, is
poised to derail people’s retirement
plans “unless they prepare properly now.”
This recommendation is among the
insights revealed in the latest survey of
the bank’s HSBC Insurance unit, which was
published recently.
Perfect storm
“A perfect storm is confronting pensions
planning, created by an aging
population, falling pension funds values, a
drop in state and employer contributions
and an economic downturn which is
forcing people to make tough financial
choices,” HSBC group chair Stephen
Green said about the findings.
According to the findings of the fifth
annual Future of Retirement study,
people’s short-term survival strategies
during a recession often create “serious
long-term pension ‘downturn deficits.’”
It also noted that there is “a continuing
lack of pensions planning, even though
people are aware that they are likely to
live longer” which is being exacerbated
by “poor levels of financial
understanding, education and access to
advice.”
Also during difficult financial times,
people are more concerned with
protecting their possessions in the short-
term than ensuring they can look forward
to a financially secure retirement, the
survey revealed.
“The consequence of these combined
factors is that many people will struggle
to make ends meet when they come to
retire, unless they urgently review their
priorities and planning,” the HSBC study
concluded.
The survey culled its findings from 15,000
respondents in Brazil, Canada, China,
France, Hong Kong, India, Japan, Mexico,
Saudi Arabia, Singapore, South Korea,
Turkey, the United Arab Emirates, the
United Kingdom and the United States.
The results are used by HSBC to structure
financial solutions for an estimated 128
million clients worldwide.
The latest edition—dubbed “It’s Time to
Prepare”—identified a ‘preparedness
gap’ in people’s pensions planning
worldwide, with nearly nine out of 10
people feeling ill-prepared for their
retirement.
It found that only 13 percent of the
respondents feel fully prepared for their
retirement, and 86 percent are unsure of
what income they will receive in
retirement.
Only 27 percent feel they fully understand
their long-term finances, while 43 percent
have undertaken some planning for later
life—but still remain unclear about what
their retirement income will look like.
More alarmingly, 14 percent have done
“no retirement planning at all.”
“The preparedness gap reveals that
families need greater support and
guidance to effectively handle their
finances, not simply in schools and
colleges but through trusted advisers
providing professional financial
guidance,” Green said.
Golden opportunity
“If people prepare adequately for the
long-term, an extended later life can
present a golden opportunity for many—
but now is the time for people to seriously
consider boosting their pensions
contributions to improve their prospects
of a comfortable retirement,” he added.
“The cost of procrastination is likely to be
high.”
Nonetheless, the study found sufficient
basis for hope in strengthening the
financial prospects of people of all ages,
as their move toward retirement.
The so-called “advice gap” showed that
there is a need for solid financial advice
to help this market, which financial
service firms like HSBC can provide.
The survey revealed this advice gap
linking the lack of preparedness to
insufficient financial education and
guidance.
A full 43 percent of respondents have
never had any form of financial
education, and 29 percent felt “fairly
unprepared” for their retirement,
according to the findings.
Almost half—or 47 percent of
respondents—have never had any form
of professional financial advice, it added.
“This year’s report reveals a need for
people to have access to more and
better financial advice and guidance to
help them survive the downturn while
making the right financial decisions for
the long-term,” said HSBC Insurance
group managing director Clive Bannister
in a statement.
But perhaps the most alarming results of
the survey showed that, in trying to
protect their finances during the ongoing
crisis, many people are actually putting
themselves in greater financial danger,
inadvertently.
People are paying little attention to long
-term considerations such as their likely
retirement needs, focusing instead on
purely practical short-term concerns,
which they better understand, HSBC said.
“General insurance solutions—motor,
travel, home and even pet insurance—
are seen as a greater priority than
addressing longer-term needs around
insuring health or income, even when job
security is in question,” the survey said.
Delay in retirement
And despite global economic
uncertainty, only 6 percent said they
intend to take out income protection
insurance in the next 12 months
compared to 16 percent insuring their
home.
Also, as a result of the economic
downturn, 92 percent of people have
changed some element of their finances,
with only 19 percent still on track to retire
according to their original plans.
Because of the crisis, about 17 percent
are reducing retirement savings or
stopping saving for retirement
altogether, while 18 percent have used
savings to pay off debt.
Along with the global trend, 9 percent of
respondents now expect to delay their
retirement.
“[The survey] reveals the lack of
understanding people have around their
long-term retirement needs, said Cicero
Consulting financial services consultancy
director Mark Twigg, whose group
conducted the survey. “They are less well
-educated or aware when trying to
understand these needs and to act on
them, than with their short-term
requirements.”
“As the economic ‘perfect storm’
threatens, it is important that people are
encouraged to understand long-term risks
and to manage them effectively. While
people are taking more responsibility for
themselves, there is also a definite role
for financial institutions to continue, and
to build on, their work to educate and
inform,” he said.

http://business.inquirer.net/money/topstories/view/20090706-213995/Prepared-for-retirement-Think-again