A time of reflection:
As the year 2023 comes to a close, it’s an opportunity for everyone (working adults and retirees) to reflect on goals met or unattained during the year.
Importantly, it’s the right time to plan ahead. For those deadlines that weren’t met in 2023, I recommend a change of deadline, don’t change the goal.
Begin 2024 correctly. If you haven’t done so before, now is a good time to have a competent financial advisor on board to assist in stimulating your financial journey.
Don’t live with regrets. It’s important to live a balanced life as it helps to minimise regrets in retirement. Having a balanced life relates to one’s relationships, career, health, fitness, finances, and general well-being.
A survey conducted among retirees by Allspring Global Investments revealed that most respondents regretted that “they did not start saving early enough”. As we approach a new year, let’s examine our saving and investment mindset. Some pre-retirees have already decided to retire later than the normal age of 65, others have chosen to undertake partial retirement, as they seek to supplement their retirement income with part-time job opportunities. All workers must begin saving for retirement early, as the future is uncertain. There are employees who may be forced into retirement early due to lay-offs, redundancies, or health issues. So, retirement planning is an important part of any financial plan. Contingencies are needed to counter life’s eventualities or setbacks.
The Allspring survey showed that many people who started saving after age 40 were still not saving enough to compensate for the years of delay. Based on my observation and experience locally, my findings agree with the results of the survey.
There is a reluctance of some employees to contribute the maximum required in their workplace pension plan. Some employees have got accustomed to the minimum contributions and have little wiggle room for an increase in pension contributions. Others have been inconsistent with the increased monthly contributions. In Jamaica, there is no mandatory automatic enrolment in workplace pensions, and saving early for retirement is not encouraged by some employers while some employees continue to ignore the significance of saving early for retirement. There is the notion by some employees that there is still time, but inflation eats away at salary increases that have not kept pace with inflation, making it difficult to “catch up” for time lost in saving for retirement.
In a survey with retirees, longevity researchers at LongeviQuest, discovered three things that they regret the most. One thing is “worked too hard”. One retiree regretted that he didn’t try another career that would allow him to enjoy more time with his family.
Another reason for regret is “not spending more time with their family”. Parents regret that they didn’t spend more time with their children. Parents may try very hard to ensure that the household income is provided, but some fail to achieve quality family time.
The third reason for regret given by retirees is “not enough travel time”. Some retirees who experienced the joy of travelling late in life believe that they would enjoy the experience more if they were younger. This underscores the importance of living a balanced life. It’s good to work hard, but leisure and travel play a role in one’s well-being, especially if done with family. I recommend the making of a budget that covers spending for leisure, travel, and necessities as a requirement for effective financial planning.
A 78-year-old was asked by the researchers if she were to choose between remodelling her kitchen and taking an excursion, what would be her decision? Her response was to take the trip. The longevity researchers are of the view that a positive state of mind is very important and they don’t allow their regrets to make them depressed. A lesson we can take away from this is that the pain of regret can be managed and it is not a life sentence.
At this time of the year, I am encouraging employees and employers to consider their financial plans. Do not live with the pain of regret but choose instead the pain of discipline. Research shows that the biggest regrets retirees have included not having a goal for retirement, poor financial planning, planning to work much longer, or retiring too early without contingencies for emergencies or setbacks, ignoring the impact of inflation on their retirement plan, and not having a close relationship with their children.
Workplace pension and NIS pension benefits provide guaranteed income in retirement; however, your non-guaranteed income (stocks and real estate ) is crucial in keeping your head above financial waters in retirement by supplementing your fixed income and beating inflation. Non-guaranteed income yields higher returns on investment. A diversification strategy that offers non-guaranteed and guaranteed income is the answer to financial security in retirement.
Grace G McLean is a financial advisor and retirement 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 email@example.com.