Hands up if you would like to have a financially comfortable retirement!

Ask the average person in the street this question and you will get a resounding answer. Yes. However, making this a reality is likely to lead to disappointment for many people, especially if you want your retirement to truly be the golden years of your life. To exacerbate the situation, there is a distinct possibility that the retirement age will increase from the current levels as government finances are stretched and the population ages.

Cast your mind back to last year and you will no doubt remember the violent street protests in France, as people revolted against the planned pension reform to increase the retirement age from 62 to 64 before the end of the decade. Although definitions of statutory and early retirement ages vary across Europe, there is no denying retirement ages are rising across the continent.

To put this in context, according to the OECD, the average age of retirement for men is 64.3 years and 63.5 years for women. The highest is 67 years in Norway and Iceland,  and the lowest 62 years in Italy, Greece, Luxembourg and Slovenia, for both men and women.

In contrast, the average age in Malta is 63 years, marginally below the EU average level. In fact, depending on when you were born, the retirement age in Malta for both men and women is currently staggered from 61 to 65 years.

The OECD report goes on to confirm how the number of years in retirement is also increasing, from an average 12 years in 1970 to almost 20 years in 2020 for men and from 16 to around 28 years for women. Given this data and the prospect of living even longer in retirement years, it is no wonder governments are concerned about finances, especially when combined with population demographic pressures.

So back to my title question, and how you can make this possible. Once you have an idea of how you would like your retirement years to look, the first step should always be to pay down your debts or at least keep them manageable. An extreme solution would be to implement an aggressive savings strategy and substantially increase how much you save or invest. However, financial planning should be about adopting a sensible and pragmatic approach.

Next you need to have an understanding on how much income you will require when you retire. Your commitments will most likely be less, but if you want to have regular holidays, eat out frequently and buy a new car every few years, you will have to incorporate that into your calculations. Don’t forget to include annual increases in prices across all products and services. This does not have to be a daunting exercise and your bank adviser can assist you in calculating these numbers.

Once you have this figure and deduct the State pension (approximately €1,000 maximum every four weeks), you should have a clearer sense on your shortfall. Next you need to assess your current disposable income and your ability to increase your savings to plug your shortfall.

To encourage saving for retirement, the government is currently providing tax incentives on personal pension plans and on voluntary occupational pension schemes, which can be quite significant. As with all investments, a bank adviser can help you in understanding your risk tolerance and ensure you select the right funds for your pension pot.

Depending on the performance of your investments, a financially comfortable retirement can be a real possibility. Naturally if the investment returns are not as strong as you had hoped for, you will inevitably need to make some compromises, and I don’t mean swapping your lampuki pie for pastizzi. There are a number of avenues open to you, including supplementing lower pension income with part-time work (semi-retired), if your finances allow and enjoying a corresponding increase in your leisure time.

Many citizens are still economically active in their older age and enjoy the social interaction with younger colleagues and the satisfaction of making a positive contribution through knowledge transfer. The key is to be flexible.

Retirement under this scenario may not be the one you initially dreamed of, nevertheless, it can still be financially rewarding and happy.

Dipak Chouhan is the head of Business Development, Retail Banking at Bank of Valletta.

The information provided in this article is based on the personal opinion of the author and is being provided solely for information purposes. This information should not be construed as investment advice, advice concerning investments products or decisions, tax or legal advice.