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WEF Report Highlights Retirement Planning Shortfalls

A new report from the World Economic Forum (WEF) titled “Investing in (and for) Our Future”, has outlined concerns that many of the world’s retirement savers will outlive their savings by more than a decade.*

The WEF warns that overburdened state and private employee retirement plans are ill-equipped to deal with the pressures of ageing populations and new economic concerns, and says that retirees in six of the world’s major economies – Japan, the United Kingdom, the United States, Germany, Australia, Canada and the Netherlands – risk outliving their retirement plans by, on average,8 to 20 years.

It also sought to highlight the plight of female retirement savers in particular, who, as well as living longer than their male counterparts, tend to draw on smaller pension pots.

Health Savings Accounts and Expatriation

Health savings accounts (HSAs) are an attractive and popular complement to the retirement plans of an increasing number of Americans. The Employment Benefit Research Institute (EBRI) reports that around 3 in 10 employees in the US are enrolled in HSA-eligible health plans.*

Although an HSA is not a retirement account per se, they are frequently a component of a retirement saving strategy as they can be used to cover qualifying healthcare expenses while also offering tax-friendly advantages, particularly if the account holder is able to compound the account’s balance over years.

The Fuss About FATCA and Financial Data Sharing

We recently reported on why it is likely that the Foreign Account Tax Compliance Act (FATCA) is likely to remain in place in the US in favour of the Common Reporting Standard, but pressure is mounting in a number of foreign jurisdictions for governments to act.

In France, a group of so-called ‘accidental Americans’, who are being asked by the IRS to pay tax on global income based on their citizenship alone, have already lobbied US Democrats and have now taken a discrimination lawsuit to the French court because they have been denied access to loans and banking services as a result of FATCA.

Retirement Planning – Numerous Bills Signal Congress Means Business

Across the globe, governments, lawmakers and society in general are all beginning to realise that as human longevity increases, the need for action on retirement planning is becoming more crucial and a social imperative. Without action, America, along with much of the rest of the world, will soon see generations of people whose retirement years will be impoverished and where affording the basics in later life, such as housing and healthcare, will become a lifelong worry.

However, there are various bills currently doing the rounds in Congress that show there is serious intention to make big changes to retirement planning.

What’s your tax residency status in the US?

All non-US citizens who live in the United States are considered to be non-resident aliens unless they meet the criteria for one of the following two tests.

Ensuring Contingency for an Unexpected Early Retirement

For many retirement savers, early retirement is the holy grail. However, the reality is that once an age is reached when early retirement is available, many individuals re-evaluate their plans, putting retirement on hold either out of financial concern or a feeling that they are not yet ready to end their careers.

These people are lucky; they have a choice. But what will happen if ill-health, family commitments or professional circumstances take retirement plans out of your hands. Not only can such a situation make you feel helpless, it can leave you facing a cashflow conundrum that has the potential to plague your sunset years with insecurity and uncertainty.

This is why it is essential your retirement plan accounts for the possibility of the unexpected.

The Best Retirement Strategy – Begin Early and Stay Disciplined

Things are not getting any easier for younger retirement savers. It is predicted that by 2060, the number of Americans who are 65 or older will have risen from 46 million today to more than 98 million – with this demographic accounting for 24 percent of the population (up from 15 percent today).*

Add to the mix the fact that college fees are at record high levels, entry-level wages are low and housing costs are high and a picture quickly establishes of increased financial pressure on a whole generation of retirement savers. In fact, for many aged 18 to 34, simply being a retirement saver may seem like a distant dream as, according to a report by Merrill Lynch and Age Wave, this demographic owes an average of $3,700 in credit card debt.**

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