THE RETIREMENT STORY

Picture early retirement between ages 55 to 60.
The National Insurance Corporation (NIC) pays insurance contributions at 63 what do you do in the meantime?
Your company had a pension plan which you contributed to. You took a lump sum and not a monthly payment as the annuities offered for monthly payments are not attractive.
The lump sum is invested and you are expecting to live off the interest which is paid annually as monthly interest may be insufficient to cover basic necessities.
Monthly income now falls far short of current expenditure. You now have access to less than 50% of your previous monthly salary.
SCENARIO
The house is paid for in full or your mortgage is still current.
The car is paid off in full or there is still a balance due on your car loan.
You have other loans with banks or other financial institutions.
Your house has a second mortgage on it to finance the University Education of a child or children.
There may be a loan at the Credit Union for prior major medical expenses.
ONGOING EXPENSES; these could be;
Car insurance
Vehicle servicing, maintenance and repair
House Insurance
Medical Insurance
Life Insurance
These all have to be paid monthly.
HOME MAINTENANCE & REPAIRS
The roof of the house needs to be changed.
The house needs painting inside and outside; the kitchen cupboards are rotting and needs to be replaced.
The solar heater has gone bad.
The bathroom needs to be redesigned to take into account your current physical state or that of elderly parents living with you.
The refrigerator, the cooker, the kettle, the toaster, the toaster oven, the washing machine, the dryer, the dish washer etc. These have to be replaced to help you maintain the standard of living that you have become accustomed to.
The monthly grocery bills, the petrol bill, the water bill, the telephone and cell bills, the electricity bills, doctors bills, medication, the vet bills, the gas bill, the domestic help, the gardener and the list goes on and on.
The children have just begun to work and have their own expenses to meet including their students loan.(Remember you mortgaged your family home to rase the required sum for the university education so repayment of that loan is certainly a priority.) Not all the children have honoured that commitment and such a situation could have you in dier straits. They also want their own car and apartment.
The spouse may no longer be in the picture. Or may be, if so some assistance is available the pensions can be combined and the family can sell one of the cars and make do with one car in the family. This creates some pressure for two individuals who previously had differing interest and did their own thing. The independence of both parties may be threatened, thus creating new strains on the relationship.
Elderly parents now require care 24/7 in some cases they do not have their own resources to take care of their medical and other needs. There may be siblings but everyone have their own commitments with their immediate family to take care of. To avoid having to deal with family politics you may not want to use the resources of the parents to take care of them as you may be accused of depleting family resources. You prefer to play it safe. Care of the elderly may require redesign of existing homes to facilitate their easy movement and care. This state of affairs also comes with its specific dietary constraints and challenges. The cost of medication and frequent doctor’s visits that may include house calls is a reality.
The usual result is that persons who are able may have to continue in employment – in some instances competing with recent school leavers for limited job places exacerbating the unemployment situation amongst the youth. It may also be an opportunity for those capable, to enter some form of self employment thus living their life’s purpose and utilizing their skills and experience to contribute to the economic development of the county and their own physical, financial and mental well being.
SOLUTION: Do not depend only on your NIC contributions ; INVEST IN SOME FORM OF PENSION PLANNING that will pay you an adequate monthly sum or other appropriate forms of investment that allows for multiple sources of income by the time you are in that situation. (It is not too early to speak with a financial planner/advisor but whatever you do, do not depend only on NIC and the pension plan that your company contributed to). Proper planning can make the difference between a life of abject poverty and destitution or a life style commensurate with the standard of living that you have grown accustomed to. Investment in real estate has so far proven to be beneficial to most people. The more adventurous have looked at other high risk/high return forms of investment in the stock market and other financial instruments.
Young adults have been advised to save at least 10% of their monthly income in preparation for retirement. It is fool hardy to say that you may not live to see retirement age. We do not have that power or foreknowledge, we do not know how long we may be around for and the circumstances we are likely to find ourselves in sometimes due to unforeseen medical conditions or other situations that befall us. This may sound farfetched to a 30 year old but it is never too early to begin such planning. When you get to the ripe old age of 65 you will be happy that you did. You are now 30 think of where you were twenty years ago and imagine thirty five years hence. You had better believe time flies.
Look around you and see the people that you considered as strong, no nonsense, strict, stern, independent adults twenty years ago, what do they look like now. Get the picture that could well be you twenty, thirty years, forty years from now.
Arrangements for retirement are usually grossly inadequate and you are never too young to begin to think of these plans. You need to plan now and take appropriate action to ensure that you end years are not spent in destitution. It is not uncommon to visit a home for the aged and see professionals, retired civil servants, teachers, nurses living in these conditions sometimes without adequate contributions to the institutions, at the mercy of all and sundry.
Some persons chose to enter these institutions because of the companionship that they offer. Ensure that if you make that choice you are in a position to pay for the services that will be rendered to you. Sometime even these persons may have had their own homes, these have over time gotten into a state of disrepair. Sometimes the homes are too big for them to manage in their old age, there may not be any close family members willing and or able to provide assistance or support. Children may have migrated and the envelope syndrome may not generate sufficient income to take care of all the needs of their aging or elderly parents. Remember we always need people and it is Barbara Streisand who reminds us that “People who need people are the luckiest people in the world.”
A glimmer of hope for home owners is for the financial institutions to offer the facility known as “reverse mortgages” where aging home owners can live off the equity generated from homes that have been fully paid for. If this facility becomes available then the investment in purchasing homes would be well worth it as the equity could be used to take care of all the needs of the home owner if they do not otherwise possess the means to do so. It also means that offspring or other family members who wish to inherit the property would have no choice but to contribute to the upkeep of aging parents.
Whilst you have the capacity and capability save for the time when you will have neither. Open a separate account regardless of how small, for that purpose. If you work for another 25 years and you saved $100.00 every month you would have saved $30,000.00 and it would have earned compound interest. No one will hand that sum to you when the time comes, but you have the capacity now to earn it. Most financial institutions now offer retirement plans that you may find both affordable and useful.
The saying a stitch in time saves nine in instructive when it comes to the RETIREMENT STORY. Planning and saving for a rainy day is good advice. Do not depend on what your parents have, what they own may all be needed to take care of them in their later years. With the time value of money being what it is what may seem like a huge sum now may be insufficient in the next ten years to take care of basic needs. The good book tells us “Blessed is the child who has his own.”

Thecla C. Deterville
April 2010.