SWIMMING UPSTREAM: Planning for retirement
This week I write on retirement planning, also known as financial independence planning. We plan for parties, graduations, weddings and trips but very seldom for retirement.Retirement planning is a relatively young discipline. Consider this: In 1930, only one in ten workers was covered by a pension programme and social security – in other words, NIS did not exist. For most, retirement means a time of luxury and pampering, travelling the world, for others it means remaining in the work force to earn income to meet needs. However, today’s retirement is seen by most as a vibrant and significant time of life which may be a period of 30 years or more as we are an aging population thanks to medical advances.Most young persons make the fundamental error of shortening their accumulation period of retirement income, by postponing setting aside a fixed amount monthly, only after long term responsibilities such as buying a home or paying for education. Income for retirement comes from three sources, Social Security (no longer a guarantee if you have not contributed), employer sponsored pension benefits and personal savings. Will you be one of those persons who will have to work in your retirement due to a 70 per cent drop in your monthly income? Readers if you currently work for $2 000 monthly how will you survive on a $155 weekly?I must confess there are some roadblocks to accumulating retirement savings. One of the biggest is persons using all of their after tax income to spend on current consumption to maintain a standard of living, which will lead to an absence of savings. Saving ratios of 90/10 or 85/15 are good saving ratios to aim for monthly.Another impediment to saving for retirement is unexpected expenses such as medical bills, appliance purchases, home repairs and automotive expenses. The setting up of an emergency fund is best suited to accommodate these unforeseen expenses.One of the greatest impediments to Barbadians having adequate retirement savings is financial literacy. Great apathy and ignorance is shown by many persons both young and old when information is being shared. For those of you who may want to shoot the messenger, ask yourself some questions. How many financial literacy free seminars have you attended? Where are the people when these seminars are offered? I don’t see many persons, thus I have been suggesting that we need to incorporate either a wet fete or a bashment party. Retirement does not have to be a time of hardship if you plan early.
• Kammie Holder, the boy from the village saying congratulations to those in the insurance industry who earned the FSS and LUTCF.