LAST week we looked at some savings objectives that women in their 20's and 30's should pursue. It is important for us to make the right financial moves in our youthful years if we want to enjoy the fruits of our hard work in the later phases of our lives.
If you recognise that you had missed some crucial savings milestones in your past, you can still rewrite your present to ensure that your financial future is more secure. Here are some savings goals that should be practiced if you are in your 40's and 50's:
Reduce lifestyle debt
Although economic challenges or lifestyle choices may lead you to borrow, it is important for you to aim for debt freedom at this time. Your focus should be on amassing wealth, not on building liabilities. Try to maintain a prudent budget so that you can find more money to save. This may require you to be more analytical of each expense you are about to incur and determine if it's absolutely necessary before you make the spend. It may mean reducing your discretionary line items like entertainment, shopping, travelling or eating out.
Maximise your retirement fund
If you haven't started saving for your retirement, make this your priority goal. While it is always ideal to start in your 20s, it's never too late to get going. If you begin at a later stage of life, unfortunately, you may also have to delay your retirement age. Become more self-aware, and determine the age you want to retire; then calculate the number of years left to achieve that milestone. This is known as the investable age or investment horizon. An investor who is 40 years old and wants to retire at 60, investment horizon is 20 years. Soon you may realise the time isn't that far away.
If you don't have a retirement plan where you work, or you are self-employed, you can open an individual retirement account like ScotiaBridge, from Scotia Insurance. If you are already contributing to an approved retirement scheme, try to find extra funds to increase your nest egg. For example, if you've cleared your car loan, redirect that payment into your retirement account. Another important mistake to avoid is to prematurely use the money you may have set aside for retirement.
Boost children's education fund
Assess your progress on saving for your children's college fund; have you been contributing enough to cover the increased costs of tertiary education over time? Will your child be going to college overseas or in Jamaica? Determine if you need to save in local or hard currency and make those contributions to a savings or investment account monthly through pre-authorized payments. Again, consider making spending sacrifices to boost any possible shortfalls that could arise in their education plan.
Supplement your retirement plan
This is the time for you to take a realistic look at your retirement nest egg. Your financial advisor can help you to select additional long-term investments that can supply tax benefits and counter the crippling effects of inflation. A retirement fund should be a well-diversified portfolio that has a variety of investment products which will be able to rebound if one product in your portfolio underperform; and will also have the capacity to generate sufficient returns when the time comes. Keep track of your portfolio growth to ensure you are on target.
Acquire investment property
Consider other options to diversify your retirement portfolio to ensure that you can generate sufficient income when you decide to stop working. You may look at renovating your home to provide extra rooms for future rental earnings, or purchasing a separate investment property.
Build legacy savings
Even if your calculations indicate that you are sufficiently covered for your expected retirement needs, you can still increase your savings and investments to build significant assets for your offspring. Make it your goal to make the next generation enjoy the wealth you leave behind.
Start reducing investing risks
As you get closer to your retirement date, you need to review your investments and reduce your exposure to riskier options. With the help of your advisor, you should rebalance your portfolio if necessary, to ensure that you will receive your desired retirement income flow at that time.
Nerisse Pottinger is a licensed investment advisor from Scotia Investments Jamaica Limited.