Alexander Forbes: Research shows consistent investment returns key to comfortable retirement
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2010
Thu
25
Feb
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Most people understand that they should save for retirement but what is less well known is just how large a portion of retirement income comes from investment returns - not just how much you’ve saved.
John Anderson, Head of National Consulting Strategy at Alexander Forbes, said: “More than 75% of retirement spending comes from returns on investment.
“Investment performance is therefore paramount in meeting net replacement ratio objectives or simply put, the percentage of your salary that retirement savings will replace when you retire.”
Anderson notes that according to research carried out by Alexander Forbes, an important contributor to a comfortable retirement is consistent investment returns that are above inflation and over the long term.
“Our research shows research shows that for every Rand spent in retirement:
• 23 cents on average is from pre-retirement contributions
• 41 cents on average is from pre-retirement investment returns
• 36 cents on average is from post-retirement investment returns
“What the research illustrates is that three quarters of retiree spend comes from returns on their savings.
“It highlights that while putting money away for retirement is of course fundamental, more focus needs to be on returns on that investment because each 1% per annum really counts.”
Compound interest is one of the most important allies for savers.
The positive impact of interest increases exponentially over the long term as one starts to earn interest on interest. A further result is that an increase in the interest rate has an exponential impact over the long term.
Please download the attachment to view the whole article together withthe accompanying graphg and table.
Source: FD Media & Investor Relations
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