RETIREMENT PLANNING has become increasingly important in light of changes in the nature of employment as well as increased life expectancy.
As Barbados Association of Insurance and Financial Advisors (BARAIFA) chairman of Education John Wilson noted in the July 10, 2011 SUNDAY SUN, a long career in a single company is something of the past.
“Now, job changes are more frequent and may be involuntary. Older workers are sometimes forced into second careers or self-employment.
“This development is likely to reduce pension benefits when [people] move on to other jobs or careers.
“Retirement planning has become even more important today primarily because people are now experiencing longer periods of retirement,” he said.
Wilson noted that this was due to a number of factors, including early retirement and longer life spans.
He said retirement planning was also essential because
• more money than ever will be needed to fund retirement, so people must begin early and save regularly and aggressively.
• people today expect to lead a more active lifestyle during retirement.
• retirement is seen as a reward for a lifetime of hard work, so people want to have the money to enjoy themselves.
• people want to be free of financial worries during retirement.
Wilson noted that retirement is also associated with psychological and emotional needs that accompany lifestyle changes.
“[People] in the workforce therefore need a holistic retirement planning approach that considers all aspects of an individual’s life, rather than just the financial aspects,” he said, noting that such aspects include relocation possibilities, wellness, nutrition and lifestyle choices, and other gerontological issues.
“Today many baby boomers, who are the largest group of pre-retirees, have not saved enough or planned adequately for retirement.
“This has created some critical issues for this group so the major road block for savings in this group needs to be addressed.
“Moreover, it has been projected that between 2017 and 2046 the baby boomers will have the most significant impact on the NIS programme.
“By the year 2031, the peak of the boomers’ retirement years, it is predicted that about 24 per cent of the population will be age 65 and over. This change will place an enormous strain on Government’s social programmes,” he said.
Wilson noted that as the ageing process continues, boomers will put more demand on the medical system, and health care costs are therefore expected to rise.
“So it is worthy of note that because of early retirement trends and increased longevity, many Barbadians will be spending about a third of their lives in retirement. This should be a matter of concern to some retirees and some who are planning for early retirement,” he said, suggesting that it was individuals rather than employers or Government who have to plan.
Meanwhile, in the July 2, 2010 WEEKEND NATION financial advisor Kammie Holder said most young people make “the fundamental error of shortening their accumulation period of retirement income by . . . setting aside a fixed amount monthly only after long-term responsibilities such as buying a home or paying for education.”
He noted that there were some roadblocks to accumulating retirement savings.
“One of the biggest is [people] 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 to aim for monthly,” he said.
Holder noted that another impediment to saving for retirement is unexpected expenses such as medical bills, appliance purchases, home repairs and automotive expenses, and suggested that the setting up of an emergency fund is best suited to accommodate these unforeseen expenses.
However, he noted that one of the greatest impediments to Barbadians’ having adequate retirement savings is financial literacy.
“Great apathy and ignorance is shown by many, both young and old, when information is being shared,” he said.
Meanwhile Elizabeth Morgan, branch manager of Caribbean Money Market Brokers (now First Citizens Investment Services), said it would take between 70 and 90 per cent of a person’s pre-retirement income for that person to enjoy the same standard of living after s/he retires.
In the September 3, 2007 BARBADOS BUSINESS AUTHORITY Morgan advised those attending the seminar that they needed to plan for retirement so as to ensure that they did not outlast their money.
“It is important to plan because of inflation.
A dollar today is not worth the same thing tomorrow. Every day prices are going up and you need to plan for that,” she said.
CLICO International Life Insurance Limited financial advisor Harold Eastmond said people who started saving during the early stages of their working lives would have enough money on retirement.
For example, he explained, if a teenager began putting aside ten per cent of what s/he worked for, on retirement s/he would have more money to live comfortably.
Furthermore, in the May 19, 2008 BARBADOS BUSINESS AUTHORITY financial consultant Jepter Ince told prospective retirees to live with a road map.
Speaking to members of the Barbados Association of Retired Persons (BARP), he told the audience to prepare adequately for retirement since failure to do so may result in regret, especially if their pension is their only source of income.
He suggested they focus on critical liabilities like electricity and water and plan well in advance for major payments, including land tax and car insurance.
The investment analyst cautioned retirees not to see retirement as the end.
“When you’re retired, you’re not done. [However] you may not want to work eight hours a day,” he said. He urged them to continue using their skills to increase their disposable income.
He also asked BARP members not to participate in long-term investment plans if they are very close to retirement. “You should be able to get money on short notice,” he said. He added, however, that it was fine to invest surplus cash for the benefit of children and grandchildren.
He noted that people who had already retired were getting “the best of [National Insurance Scheme pensions]”, adding that there would be challenges when the retirement age was raised to 67-and-a-half years.
Ince reminded everyone that retirement was the time to enjoy what was accumulated in one’s working life.
