Ever so often, I have seen employees and self-employed persons nearing retirement who either don’t have a pension plan in place or are concerned that they have not saved enough for retirement. Time is an asset that is undervalued and underutilised by many.

There are some young employees who feel that they have time to plan for retirement and therefore retirement planning is not seen as a priority in their financial plans. Let’s take a close look at different generations and their view on retirement. The Silent Generation refers to persons born between 1925 – 1945. The Baby Boomer Generation was born between 1946 and 1964. Generation X: 1965 – 1980. Millennials 1981 – 1996. Generation Z: 1997 – 2012.

According to a report by the Transamerica Center for Retirement Studies, 53 per cent of American workers polled said their income is insufficient to save for retirement. With regard to debts, 61 per cent of millennials say that debt is interfering with their ability to save for retirement and 51 per cent of Generation X also agreed that debt impedes their ability to save for retirement. Pertaining to emergency savings, “one in seven workers across generations have no emergency savings at all”. Emergency funds are crucial for all generations. Monies are needed for large or unexpected expenses and to weather financial challenges or setbacks such as huge medical bills, loss of employment, and home and auto repairs. Funds should be invested for emergencies prior to making any long-term investments. Be reminded that emergencies can happen at any time. It’s better to plan for emergencies and not have them than not to plan and suffer the consequences, such as borrowing or using funds earmarked for retirement to repay loans or cover unexpected expenses. Such actions can sabotage retirement goals and create undue stress. Regarding health care, the retirement report showed that 75 per cent of workers are saving for health-care expenses. There still remains a considerable concern across all generations for those who have not factored health-care costs into their retirement planning.

The Transamerica report is consistent with trends that I have identified locally, with workers facing persistent competing priorities of planning for retirement, paying off debt, and building an emergency fund.

But there are retirement planning mistakes that all employees should seek to avoid:

1. Expecting your children to be your “old age pension”. This is not a viable or sustainable option. The financial burden may prove too great and may put both parents and children’s living standards at risk.

2. Relying on National Insurance Scheme (NIS) benefits. Pension benefits from the NIS will not be enough to provide livable income in retirement.

3. Not factoring in healthcare costs in retirement planning. Health-care costs can prove significant. Understanding the current cost of health care and recognising that health insurance from the insurance provider may not prove sufficient and costly in retirement.

Projection of the cost of long-term care should be factored in and not ignored. A licensed financial advisor can assist.

4. Ignoring the necessity of an estate plan. A will is important if you have assets. Estate planning is more than just making a will.

You may need to review beneficiaries and select an executor to administer your estate. Another consideration is to have a power of attorney to oversee your assets and health care if should you no longer be able to make decisions on your own.

5. Increasing debts. Avoid increasing debt, especially nearing retirement. Pay off or pay down on debt prior to retirement. An emergency fund is quite useful in this regard. Save for retirement while paying down debts. You don’t want to reach retirement debt-free and broke. Strike a balance.

6. Ignoring or underestimating the impact of inflation. Inflation robs your money of purchasing power. Have a diversified portfolio of investments such as a registered pension plan, stocks, bonds, real estate, and certificate of deposits. Stocks are best at beating inflation over time.

7. Not increasing pension contribution after a salary hike. Increase your contribution to your retirement nest egg each time there is an increase in earnings. Let compound interest and time work to your advantage.

8. Not making use of employer’s contribution matching. Some employees are not aware how much money is “left on the table” when their employer offers to match the employees’ pension contribution. Eg: If your employer is matching 10 per cent of your pensionable income, then you should contribute 10 per cent. When you insist on contributing five per cent, it means you have given back “free” money to your employer. Contribution matching builds your nest egg for retirement.

9. Quitting your job too early. There are employees who “leave money on the table” because they fail to check how near they are to be vested. An organisation’s policy may stipulate that employees are vested after working for five years with the company. It means they are entitled to a pension from the organisation upon retirement. Weigh the pros and cons before quitting too early.

10. Spending pension refunds upon changing jobs, instead of investing the funds.

Planning for retirement takes discipline, patience, and commitment. Identify your retirement goals, estimate how much money you will need in retirement and take action. A professional and licensed financial advisor can help.

— Grace G McLean is financial advisor & retirement specialist at BPM Financial Limited. Contact her 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