Global study shows a significant shift in how retired investors are prioritizing their spending and saving
Three years ago, more than one fifth of retirees who invest said that they would prioritize luxury items for their disposable income. Today, just 7% said so.
There has been a significant shift in how retirees globally are focusing their finances, with 21% saying that they will invest spare cash into their retirement savings, up from just 5% in 2017; and 26% will invest it in other investment vehicles such as equities, bonds, or commodities.
The stats are part of the Schroders Global Investor Study 2020, which polled more than 23,000 people in 32 locations including Canada.
It’s unsurprising that investors want to boost retirement funds as 43% globally and 28% in Canada said they are concerned that their retirement income will be insufficient.
With fears that state pension provisions will not be enough to maintain a good standard of living, investors are saving larger shares of their income in retirement funds. North Americans save the largest percentage on average at 16.8% compared to 16.1% in Asia, 13.8% in Europe, and 15% in ‘other’ regions.
However, this concern about retirement income doesn’t necessarily mean that respondents expect to cut their spending in later life with around 4 in 10 of retired and non-retired people saying that it will stay the same, a similar share expecting it to gradually reduce, and around 17% expecting to spend more.
Lack of information
The global survey shows that many investors are unsure of retirement options.
This is partly due to the opinion that governments keep changing the rules – 27% of Canadian respondents said this – and a feeling that saving specifically for retirement is therefore pointless.
Retired people are almost twice as likely as non-retired people to have the perception that sustainable funds will fail to deliver higher returns, indicating that they may be missing an opportunity.
“It is concerning to see that even the most advanced investors struggle with the retirement options available to them and, perhaps even more worryingly, many retirees are disregarding the role sustainable funds could ultimately play in delivering their retirement plans,” said Carolina Minio-Paluello, Global Head of Product, Solutions & Quant, Schroders.
She added that investment professionals should emphasize that sustainability and robust returns in retirement funds do not have to be mutually exclusive.
“We as an industry must look to do more to help people on their retirement pathways to better navigate the challenges and decisions they face,” she urged.
