IN Jamaica an alarming percentage of the working population remains without a pension plan, and human resource personnel sometimes struggle in conveying to employees the necessity of planning for their retirement.

Another concern is the increasing number of employees who are employed as casual or contract workers and who ignore the importance of planning for retirement.

Addressing staff of an organisation recently on the matter of retirement planning and the importance of starting a pension plan early, it emerged that a number staff members were interested in buying the latest motor vehicles and were more inclined to spend rather than save. They were, however, cautioned, as across Jamaica there have been instances of employees retiring without an income after working for many years without contributing to a pension plan. Even if the employer does not have a plan, you can start one with the several banks and investment companies that offer same.

It’s never the amount you earn that will make you comfortable in retirement — it’s the amount you save and invest and how long your money has been working for you. Many employees spend years working for money and never learned how to have their monies work for them. An increase in salary doesn’t mean an increase in spending, but for some employees the wage increase is not only the answer to the high cost of living but provides the opportunity to purchase more of what they couldn’t afford before. With this mindset these employees are trapped in a cycle of increasing liabilities and decreasing assets. A growth mindset is a transformative change that will realise a better standard of living in retirement.

Understanding the psychology of money will go a far way in coaching individuals to understand the value of securing their future and taking the necessary steps to save for retirement.

A few years ago I watched an interview with the former head of a gaming organisation and he told the interviewer that he doesn’t gamble, yet thousands of consumers gamble the lottery every day, hoping to win one day. Times are hard, and some people see the lottery as “the ticket” to their retirement dream. The thinking is, if they win the lotto, the working days will be over and it will be time to retire. This thought process may seem flawed as the odds of winning are slim, but yet the emotional attachment to money is real.

Let’s examine the investment habits of billionaire Warren Buffet, who started investing in the stock market at age 11. By age 30 his net worth was US$1 million and at age 39 his net worth was US$25 million. His wealth is an example of money compounding over time. In his youth he could have spent his money on expensive vacations and luxurious vehicles. At age 66 his net worth was US$17 billion.

What would the average person do? Maybe retire and play golf or go on endless cruises, travel the world. The secret to Warren Buffet’s financial success is time. He understood how compound interest works. He learned from his mistakes and kept saving and investing in the good times as well as the bad times. Now at 92 his assets are valued over US$113 billion.

There are people who share the view that you have to earn lots of money to make money. That’s far from the truth. It’s all about our behaviour towards money. How do you view money? Is it a means to an end? Should you spend your life working for money and not have it working for you? When is the best time to start saving for your retirement? No one can win the race against time. It is, therefore, instructive to save and invest early — and do so often.

Another interesting story is that of American philanthropist, janitor, gas station attendant, and investor, Ronald Read. For 25 years he worked as a gas station attendant. He retired and then worked part-time as a janitor at JC Penny for 17 years. He didn’t earn much but he invested throughout his working life and lived a happy and comfortable life. There was no excessive spending. When he died in 2014 at age 92 he had a net worth of US$8 million. His life story made headlines because everyone wanted to know where his wealth came from. He wasn’t a lottery winner, nor did he inherit an estate, but during his career he saved and invested regularly in blue chip companies. His small investments compounded for decades. He left an inheritance for his stepchildren and willed millions of dollars to the local library and hospital. The contrast to this is the story of Harvard graduate and MBA investment executive Richard Fuscone who became successful and retired at age 40. But he borrowed excessively to expand his home to 11 bathrooms, elevators, and pools, and had to file for bankruptcy.

It’s never the amount you earn or how far you have climbed the ladder of success that determines a life of significance. According to Napoleon: “A genius is a man who can do the average thing when everyone else around him is losing his mind.”

Grace G McLean is a financial advisor and pension specialist at BPM Financial Limited. Contact her at gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com