It is a tumultuous time for world economies. With the raging tariff war, which is likely to trigger another round of high inflation, investors and retirees face more uncertain times.

I recently had separate discussions with two individuals from opposite ends of the age spectrum; one seeking assistance with planning for retirement and the other needing financial advice to navigate the retirement years. The 36-year-old employee was concerned with the time value of money, while the retiree wrestled with how to grow investments for her household with minimal risks.

Capital preservation was a priority for the retiree and her husband, whereas capital appreciation was the emphasis for the 36-year-old.

The employee wanted to know how much to save for retirement. She requested a retirement calculation based on a monthly contribution of $10,000. Using an assumed interest rate and rate of salary increase, along with the number of years to retirement, the retirement calculator showed the accumulated savings and interest as approximately $18 million. She remarked that, due to the time value of money, that amount won’t be valued much in 29 years (at age 65). I was happy that she recognised that fact.

The $10,000 monthly pension contribution represents just three per cent of her current monthly salary. The maximum contribution allowed by law is 20 per cent. If she increases her pension contributions to 20 per cent of her monthly gross salary, the accumulated savings and interest would jump from $18 million to approximately $119 million. This computation showed that a higher monthly contribution over the long term will yield a significant retirement nest egg in 29 years. Her current salary is $3.7 million. The retirement calculator showed the future value of her current salary as just over $9 million at age 65.

At 36 years of age this employee understood that she needed to have a plan in place for retirement. She explained that someone she knows has just retire, and her monthly pension is half that of her pre-retirement salary. With her understanding of the time value of money, this employee did not want to retire at less than the salary she earned while working. She feared running out of money in retirement and needed advice on how to be financially secure in retirement.

Financial freedom requires streams of income. Regardless of the pension contributions, you should invest to supplement your pension in retirement. The current global tariff war provides a teachable moment. The future is uncertain and unpredictable.

In the same way we should have an emergency fund in place for major unexpected expenses or events, we should ensure that long-term investments are in place for an unpredictable future. According to renowned investor Warren Buffet, because no one knows when things will get from bad to worse, “the light can at any time go from green to red without stopping at yellow”.

What happens if you live long? Will your savings and investments be enough to beat inflation in the future? If the cost of living is high now, it will be higher in the future.

As mentioned earlier, I had a discourse with a retiree regarding planning for the future. It was important to allay the fears of the tariff war and the possible impact on her retirement funds. We examined various strategies to provide income and preserve her capital. Her husband is also retired and his health is compromised by several non-communicable diseases. I recommended the use of the bucket strategy as a financial tool.

This involves dividing money into three groups or buckets, such as short-term, medium, and long-term goals. Day-to-day living expenses are short-term goals. This bucket ensures there is liquidity or cash flow to meet current needs. Pensions, certificates of deposits, and government bonds are examples of funds in bucket #1 to meet short-term or current needs.

The second bucket contains funds for unforeseen expenses and discretionary spending. Examples are major health costs, a dream vacation, purchasing a new car, and funding children or grandchildren’s education. Funds should be invested in low-risk instruments such as bonds, certificates of deposits, real estate investment trusts (REIT), and other instruments that keep pace with inflation.

Bucket #3 contains long-term investments. This refers to investments for 10 years or longer. The long-term nature of these investments ensures higher returns to beat inflation and provide capital appreciation. Stocks are ideal for bucket #3 as they are less risky over the long term and will create exponential growth with time and compound interest. Bucket #3 is designed to create a sizeable nest egg that protects against retirees running out of money as they age. Funds can also be liquidated to replenish other buckets to meet emergencies or other needs. Major expenses in the long term include long-term health care and roof repairs.

Regardless of the tariff wars, investors should remember that market disruptions are like storms. They disrupt but they don’t last forever, and there will always be other storms. Staying focused on your long-term goals is the key to ride out the economic storms. It’s important to ‘batten down’ during the tariff war and stock up with your bucket strategies. You can weather the storm.

Studies show that the assistance of a financial advisor helps in preparing for retirement. A competent financial advisor can assist in tailoring a retirement plant to meet your retirement goals.

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.