A very distressing tale of two recent retirees was reported in the media last week. They are former employees of the defunct Office of the Political Ombudsman. These seniors, after serving their country for many years, were not entitled to any pension benefits.

Did the authorities fail these hard-working women? How can employees be working for 18 years or more as temporary workers? Their situation is made worse by the fact that they retired early. This means their retirement years are extended. As I ponder the challenges that these women face in their twilight years, the issue of longevity literacy came to the fore.

Have employees, employers, and the Government paid sufficient attention to the subject of longevity? Life expectancy in Jamaica is 75 years. Global life expectancy is expected to increase from 74 years to 78 years by 2050. Employees must consider the impact of longevity on their retirement savings before it’s much too late.

A 2019 United Nations report stated that “one in six people will be over age 65 by 2050”. A 2024 British Broadcasting Corporation (BBC) report indicated that, with an aging global population, more countries globally will get to the stage at which more people will be leaving the workforce than those entering.

While working, it’s important to think ahead to the time when you retire from the years of hard work. Why is a pension pivotal to retirement planning? It replaces your income and provides a guaranteed lifetime income.

I have often shared with clients and in financial presentations that a pension plan, though an essential pillar for retirement, should be supported by other investments and social security benefits. This is crucial since people are living longer in retirement and life expectancy is projected to increase due mainly to healthier lifestyles and advances in medicine.

What is longevity literacy?

It is the understanding of the effects and importance of an increased lifespan when planning for retirement. An increased lifespan has implications for the quality of life a retiree can enjoy. Long-term investing is therefore necessary for employees to consider and implement as soon as they start working.

Living a purposeful life in retirement should be carefully planned. Some retirees are living by default and not by design, as little or no thought was given to retirement planning.

There is no doubt that people know they will one day retire if death doesn’t happen early. However, not everyone has a comprehensive plan in place to live a comfortable and meaningful life in retirement, since there is no crystal ball to see what will happen in retirement.

Recently a client shared that he needs to enjoy his life now because he doesn’t know what the future holds or how long he may live. I pointed out that planning for the future does not mean you should not enjoy today. The fact is planning for the future puts you in a better position to live a purposeful life today, which augurs well for your mental health and well-being.

Let’s look at how simple it is to plan without denying the joys of living each day. An individual who is planning for the future and is investing 20 per cent to 30 per cent of their earnings monthly for 30 years or more has 70 per cent to 80 per cent of his/her monthly income to spend on needs and wants. Those needs and wants may cover the cost of food, shelter, clothing, and leisure activities.

The key is to start investing early, as soon as you start working, otherwise it can become an uphill task as you age and debt increases. Small amounts accumulated over decades at compound interest can yield significant returns for retirement. It’s called the Law of Accumulation. It simply means that small amounts accumulated over time may seem insignificant at first but will produce significant returns to meet your goals. The Law of Accumulation affects not just financial goals but all areas of our lives. Anything that we consistently do, no matter how small, either pulls us towards or away from our goals.

A 2023 report published by World Economic Forum concluded that because people are living longer it has become necessary for businesses, Government, and individuals to consider a new approach to planning for life in retirement. Longevity literacy is recommended as a worthwhile approach.

The three pillars of longevity literacy are identified as “quality of life, purpose, and financial resilience”. The World Economic Forum proposed a Longevity Economy Initiative, which has the support of over 35 major companies globally. The aim is to create a sustainable and purposeful life while being resilient in a changing world.

It’s recommended that the private sector implements flexible working arrangements and phased retirement programmes. The view is for individuals to plan for a “100-year life” in an aging world. The third recommendation is a public-private partnership, which seeks to increase collaboration between the private sector and the Government while raising longevity literacy as a priority for economies and societies globally.

It is projected that by 2050 the majority of retirees are expected to outlive their retirement savings by between eight and nearly 20 years, and this has negative implications for countries’ gross domestic product. This is a wake-up call for Jamaica.

When planning for retirement it’s best to plan for the unexpected. I always say, “You can’t have too much money, but you may have too little.”

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 livingaboveself@gmail.com.