Commentary: Beyond saving, the need to invest for a secure retirement

The prevailing retirement planning advice has been simple and consistent: save, save, save – by Nigel Green

 
While saving is undoubtedly a critical aspect of securing one’s financial future, global financial advisory firm deVere Group is challenging the conventional wisdom by underscoring the vital role of investing in building a robust foundation for a comfortable retirement.

The move comes after a global survey of over 800 clients revealed earlier this month that 65% of new clients the deVere Group took on as a firm in 2023 were not saving enough in order to be able to have a “comparable lifestyle in retirement.”

A comparable lifestyle in retirement refers to maintaining a standard of living in retirement that is similar or equivalent to the one experienced during an individual’s working years. This includes having enough financial resources to cover essential expenses such as housing, healthcare, food, transportation, and other basic needs, as well as discretionary spending on activities and interests that contribute to overall well-being and enjoyment.

The traditional approach to retirement planning typically involves diligently stashing away funds in savings accounts, pension plans, or other low-risk instruments.

This strategy aims to accumulate a nest egg that can sustain individuals through their post-working years.

However, as our economic landscape continues to evolve, deVere Group argues that relying solely on saving may fall short in delivering the desired lifestyle in retirement.

Nigel Green, the CEO and founder of deVere Group, explains: “While saving is undeniably an essential component of financial planning, it’s crucial to recognise that, in today’s world, saving alone might not be sufficient to achieve the lifestyle people desire in retirement.

“The rationale behind this argument lies in the changing nature of financial markets, inflation, and the rising costs of living.

“Traditional savings accounts and conservative investment strategies, while offering a sense of security, often struggle to generate the returns needed to outpace inflation and maintain purchasing power over the long term.

“This means that today’s workers might struggle to have a comparable lifestyle in retirement.”

He continues: “When approached judiciously and strategically, investing has the potential to provide superior returns compared to traditional savings accounts.

“It enables individuals to put their money to work, generating growth over time and helping to secure a more prosperous retirement.

“One of the primary advantages of investing during working years is the potential for higher returns.

“History teaches us that well-managed investment portfolios have outperformed the returns offered by traditional savings vehicles.

“This outperformance is crucial for building a robust financial foundation, especially given the longer life expectancies, the increased costs associated with healthcare and other necessities in retirement, and reducing government financial support.”

The deVere CEO emphasizes that investing should not be perceived as a high-stakes gamble but rather as a strategic approach to wealth accumulation.

“Investing, when approached sensibly and strategically, can mitigate risks and capitalise on market opportunities, contributing to the overall growth of your wealth.

“As a society, there is a collective responsibility to shift the narrative around retirement planning.

“While the importance of saving remains paramount, encouraging individuals to embrace a diversified investment strategy becomes pivotal in safeguarding their financial future and health of the economy, which benefits all members of society.

“The challenge is not merely to accumulate wealth but to make that wealth work effectively too.”

deVere Group recommends collaborating with experienced financial advisors who can tailor investment portfolios to align with individual risk tolerance, financial goals, and time horizon.

These professionals can guide clients through a spectrum of investment options, from traditional stocks and bonds to real estate and other alternative investments, ensuring a well-rounded and diversified approach.

Continuous education and awareness about investment opportunities are also crucial components of responsible financial planning. Empowering individuals with the knowledge and tools to make informed investment decisions creates a culture of financial literacy and resilience.

Nigel Green concludes: “Embracing a comprehensive approach to retirement planning – including diversified investments – is increasingly becoming not just a choice, but an imperative for those seeking a retirement that mirrors the lifestyle they aspire to lead.”