2020 has seen the world profoundly change as the COVID-19 crisis sparks colossal shifts in global economies, businesses and personal finances.
That said, one thing that hasn’t changed is that we all still desire a comfortable retirement with financial freedom, and at the age of our choosing.
Even in today’s world, it IS still possible.
The magnitude of the economic fallout from the coronavirus pandemic has affected every aspect of our financial lives, with a large number of people incredibly concerned about their retirement plans.
Further geopolitical uncertainty is undoubtedly on the way, which will drive markets and, therefore, financial plans.
Although financial strategies need to undergo regular review to ensure they are suitable for this era – which will likely include negative interest rates and volatile markets – it is still possible to enjoy a comfortable retirement.
However, to be able to achieve the desired retirement, you’ll need to adopt and maintain good habits.
These three key principles are saving, investing and being tax efficient. I call this my ‘SIT’ process, and all of them are vital to achieving financial freedom over the long-term.
The amount saved from each payday whilst still working is one of the most significant factors in how much retirement income will be available.
I’ve found that many people simply aren’t saving sufficiently to enjoy a comparable lifestyle to their present one during retirement.
As such, with this in mind, for those who get paid each month, there are just 120 paydays in 10 years.
There are lots of savings solutions out there to master the art of saving, but the sooner you start the easier it will be to reach your target.
Indeed, unless you are due to inherit a significant amount of money, saving alone will unlikely be enough.
Moreover, having the correct investment mix within a sufficiently diversified and regularly reviewed portfolio is essential for financial success long-term.
Although financial markets are constantly fluctuating, history has taught us that over time they tend to always go up.
If you are not invested, you won’t be making the most of the likely substantial returns you could have been receiving to bolster your retirement income.
In addition, the third key factor in successful retirement planning is tax efficiency. There are numerous legitimate ways to reduce your tax burden, which would amount to massive savings over the years.
Even though the world has changed radically this year, I believe that if people adhere to the SIT principle, they will be on track to their desired retirement.
Remember, financial freedom in retirement doesn’t have to be a pipe dream, despite what 2020 may tell you.
Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations.