Last week I received an interesting and thought-provoking letter from an avid reader of this column.

This 85-year-old retiree was moved to respond to the article “Can you survive on a fixed retirement income?”. He is still an agile senior and commits to sending the article to everyone on his contact list. It is quite fascinating that an elderly retiree is making an effort to encourage financial literacy among the younger generation.

In identifying the problem of relying on a fixed income in retirement, he noted that he has been “robbed and continues to be robbed” by inflation. He said his pension doesn’t have a provision for “cost of living adjustment (COLA)”. He referred to politicians’ and executives’ pensions having COLA and was angered that employees’ pension income lacked such benefit. For clarification, please note that only the former prime minister’s pensions are indexed to the full salary of the incumbent prime minister. This means whenever the sitting prime minister gets a salary increase, Jamaica’s former prime ministers’ pensions increase accordingly, as is the case of former/retired prime ministers PJ Patterson and Portia Simpson-Miller.

This column’s loyal reader described inflation as being more than a “thief in the night” of his standard of living. He referred to inflation as a “murderer”. He was angry that his pension income had lost 75 per cent of its value since he retired in 1999 when the exchange rate was only J$40 to US$1. He is now broke with insufficient funds to cover his retirement needs. He is of the view that every employee should read this column and avoid the pitfalls of becoming broke in retirement.

Several observations were made by the senior citizen. He observed that “the young” feel they have enough time to recover any loss from “the powerful compounding value of time”. “The middle age is concerned”, but according to him only a few accept the recommendation of increasing their pension contribution to the maximum 20 per cent of their earnings and benefit from the company matching their contribution. I underscore that by refusing to increase their contribution or making the five per cent voluntary contributions, many employees leave “free money” on the table that benefits their employer or the Government, while the employees lose future income. The reader believes it’s a “tragedy” that many ignore or don’t understand the value of compounding (the time value of money). He observed that some older folks hope to live with offspring during retirement. However, he sees potential problems for such retirees as children “now move all over the world”. Indeed the world is a global village with employment opportunities in diverse places.

But how is this elderly reader coping at age 85? He has been investing since childhood and has some shares left in two companies that he bought in the 1960s. He said that he has employed the recommendations made in this column and diversified his investments based on his risk/reward profile. In his own words, this approach is “bailing me out”. He is currently writing a book based on 30 years of studies.

I do believe that it’s not money that makes people have financial success, it’s their behaviour towards money. If you want your money to grow, you must have a long-term view. World-renowned investor Warren Buffet said, “The greatest commodity is time”. My own observation is that many investors underestimate the value of time in creating financial freedom and wealth. Too much focus is paid to what’s happening in the market now and what will happen next year and some investors abandon their long-term goals for short-term gains. The concern is how much can I earn now? What is the value of what I have now versus the value it will have in 10 or 20 years? Always remember the bucket strategy — an approach that provides for separate investment funds in retirement for the short-term, medium-term, and long-term goals of the retiree. Each bucket covers a separate financial need.

I recently received a call from a divorcee. She is bent on preserving her principal and all her funds are contained in low-risk instruments. Her focus is on “the now”, even though she is eight years from retirement. Preservation or conservation of capital doesn’t lead to exponential growth. Inflation, “the silent thief”, will rob you of the principal that you spent years to preserve. Investing in a portion of her resources stocks can meet her long-term needs and retain the value of her money. That is the best weapon against inflation. However, she believes avoiding risk is her best weapon in securing her financial future. Society can have a better quality of life if we all plan for a long life in retirement, after all, people are living longer. Your money should outlive you. This kind of mindset will ensure that your money is put to work instead of relying solely on you being at work for the rest of your life.

Warren Buffet once said it doesn’t matter whether the stock market is doing badly in the short term, he knows it will do well in the long term. That’s the goal. As the elderly retiree and loyal reader of this column said, “plan for our retirement because if we don’t die young, chances are good we live a long time in retirement”.