Key barriers preventing adequate retirement savings include the complexity of investment decisions and detrimental behavioural patterns like procrastination. For instance, the United States’ National Retirement Risk Index reveals that 39% of working-age households are unlikely to sustain their current lifestyles post-retirement. In Europe, around 19.8% of senior citizens are at risk of poverty or social exclusion, with women being disproportionately affected.
Marie Brière, the Head of Investor Intelligence & Academic Partnerships at Amundi, suggests several strategies for alleviating this crisis. Key among them are tax incentives aimed at motivating contributions from active savers and wealthy individuals. Brière advocates for enhancing educational initiatives to bolster awareness and activity related to retirement savings.
The report also emphasizes the utility of employer-initiated automatic contributions, which could significantly ease the burden for a broader demographic. Such strategies potentially counteract the common practice of deferring savings decisions, a behaviour exacerbated by the appeal of liquidity offered by banking options compared to the constraints of retirement accounts.
Many nations have started implementing reforms, including tax incentives and automatic enrolment in pension schemes, to stimulate private savings. Although the effectiveness of these reforms varies, evidence from Germany shows that interventions, such as providing detailed annual pension statements, have successfully increased retirement savings and income.
Technological tools, including virtual reality applications and pension simulators, present promising avenues for enhancing individuals' engagement with their retirement planning processes. These tools aim to demystify saving regimes and encourage increased financial literacy across all age groups.
Understanding and implementing the optimal level of liquidity in retirement savings plans is critical. While tax incentives have a pronounced impact on active savers, broader financial inclusion might be best achieved through mandated employer contributions and accessible financial advice, supplemented by innovative digital tools.
