Schroders Global Investor Study 2018 – Are you saving enough for a comfortable retirement?

It goes without saying that people would like to retire in comfort, and many strive to save and invest effectively during their working life to ensure a certain lifestyle for their golden years. How successful are people globally at achieving this?

We spoke to over 22,000 people from 30 countries to explore financial expectations for retirement and how these compare to the experiences of people who have already retired.

Key insights for Australians include:

  • Australians expect to spend an average of 39% of their retirement income on basic living expenses — but the reality is retirees require 58%.
  • Working Australians feel they should be saving 15% of their current income for a comfortable retirement, but they only save an average of 12%.
  • In Australia, 61% of retirees state they do not have enough, or could do with more income to live comfortably.
  • Australian retirees currently live off 52% of their final salary as an income. This compares to 71% of final salary which working Australians feel they will need in retirement.

Explore the Global Investor Study

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Trump’s trade war will need a circuit breaker

June was a challenging month as markets were buffeted by trade war tensions. Early in the month, President Trump imposed steel and aluminium tariffs on Europe, Canada and Mexico, prompting each country to retaliate with tariffs on US products. The Trump administration also announced a $US34bn list of Chinese goods that will be subject to tariffs beginning July 6.

Diverging economic trends saw a widening gap between global central banks, with the US Federal Reserve signalling more aggression in its policy tightening, and while the European Central Bank indicated it will end its bond purchases in December, it made clear interest rates will remain at their present level until at least the middle of 2019, if not longer. The June quarter also saw Italian politics cause volatility in bond markets as anti-establishment parties formed a government.

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Investing in reality over one version of the future

Markets were dominated by geopolitical events in May, driving volatility over the month. The biggest impact came from Italy where the reverberations from the March 4 election continue. A power struggle between the Eurosceptic populists — strong performers during the March election — and the President saw fears rise of another election and the potential of a populist win. This led markets to price in the risk of an Italian departure from the European Union.

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Geo-political considerations and the impact of China

While the risk of inflation and the overpricing of assets remain concerns, we consider geopolitical risk at the same time. Here we explore one example of how we look at the international political and economic landscape, through an analysis of China’s changing position in the economic world order.

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The end of the cycle is in sight

The pick-up in volatility that began in February continued into March with most major equity markets posting low single digit losses. Australian equities were amongst the worst performers dropping around 4% in local currency terms. All major sectors declined, with the more defensive sectors outperforming. This trend was also reflected in credit markets with credit spreads generally moving wider across the month. Bond yields drifted lower in March, but given the weakness evident in risk assets over the period, the rally was relatively modest. Despite trade war fears and equity weakness the US dollar recovered a touch in March, with the AUD losing ground. GBP also gained ground amid UK Brexit negotiations.

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