Mind the Gap

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Planning for retirement is always a tricky subject – it is often placed at the bottom of our priority list. Many people working abroad earn a decent salary but save very little money, if at all. Below, is an article written by my colleague Matt Laino. It sums things up beautifully.

Some people may want to save but find it difficult because they are in the Sandwich Generation – a time at mid-life when many individuals find themselves caring simultaneously for their children and their ageing parents.

Either way, over a few years a large gap develops in your pension, which could result in you working for considerably longer than you would like, or even need to.

When thinking about saving pensions, several important questions crop up: When should we start putting money aside? How much should we allocate each month? With mortgages, children’s education, caring for others and the cost of everyday living to deal with, can we even afford it?

Saving for and managing a retirement plan is perfectly feasible with the right professional advice. In fact retirement planning should be a top priority, especially for baby boomers and generation X-ers, even if it means making some sacrifices.

Example:

Say you’re in Thailand as a teacher, and you intend to be here for 5 years.

* THB 40,000 per month savings becomes THB 2.6 million after 5 years if it’s growing at 7.5%.

* Re-investing this with the same return over 20 years, that pot becomes almost THB 11 million.

* The equivalent in today’s terms of GBP 236,000, USD 360,000 and EUR 277,000.

* By the time you reach retirement age this capital alone could be generating USD 18,000 per annum if re-invested for a modest fixed return at 5%.

As American investment firm Franklin Templeton’s Gail Buckner recently pointed out, “There is no loan to pay for your retirement. Your retirement must come first.”

At MBMG, we are inclined to agree. However, we believe that financial planning should be carried out as early in your working life as possible and we are convinced that this is precisely where an advisor’s objectivity and professional knowledge can be highly valuable.

There should be no gap in pension contributions. A professional advisor can help prioritise goals, explore the strategies available to reach them and regularly review the make-up of a portfolio.

It is not only important to establish a target asset allocation strategy, but also to continually adjust and rebalance the portfolio. After you become comfortable with a particular level of risk, it’s important to ensure your portfolio remains in sync with the broader market trends.

Many people are reluctant to make changes, as they become emotionally attached to investments which have done well. They lose sight of the fact that markets tend to move in cycles and conditions which favoured certain investments in the past may have changed.

A professional advisor can propose changes to a portfolio with impartiality and no attachment to particular shares or sectors. They will take your wishes and interests into account and help you keep your risks to a minimum, so that you can have a financial plan that will work well for you now and when you retire.

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]