JMMB Pension Expert Shares Pointers for Retiring Early

24 March 2020

Jamaica’s pension coverage is significantly lower than its Caribbean neighbours, which boast between 50-60% of its labour force being covered by a pension scheme or retirement plan. Based on 2017 findings, approximately 16% of Jamaica’s labour force are covered by private retirement schemes and the government’s pension arrangements. This underscores the need for individuals to begin planning for their retirement, so as to avoid the pitfalls of having no preparations in place.

Camille Steer, corporate manager, fund services, at JMMB Fund Managers, in urging individuals to make retirement a priority, also gave pointers on how individuals can retire early. Having a solid financial base is critical so that you can enjoy the ‘fruits of your labour’, while being worry-free during retirement, outlined the pension expert, adding, “this financial foundation enables you to be set for life.”

It may seem tempting to splurge on the finer things in life and understandably, you have other goals, such as your first car, home ownership and that dream vacation that you want to enjoy; Steer encourages (especially young) persons to set aside some of their disposable income for retirement, as the first priority. She cautions, that you can get a loan towards achieving most goals, with the exception of retirement, which requires deliberate and consistent planning.

Steer, in giving details to the first key ingredient for retiring early, said, “start planning for retirement from your first pay cheque remains one of the most fundamental ways to ensuring you are set for life and on the path to retire early, but don’t worry if you have not started yet, begin with your next pay cheque.” By doing so, you benefit from the ‘compounding effect’, so that you can earn more on your retirement lump sum, annually and collectively.

Below is a table that shows the difference in retirement lump sum, based on the years of saving for your retirement.

Starting Age for Retirement Planning	Number of Years of Investing towards Retirement	Retirement Contribution Rate*	App. Retirement Income at 65 years / Yearly	Lump Sum Accumulated at Retirement	Monthly Pension 65 yrs. M
45 years	20 years	10%	J$ 1.8 M	J$20.7M	$164,285.71
35 years	30 years	10%	J$ 4.4 M	J$50.7M	$ 402,380.95
25 years	40 years	10%	J$ 9.5M	J$110M	$873,015.87

*Disclaimer: These projections are based on an avg. income of J$4M, with consistent monthly installations/payments and no inflationary increase and is intended for demonstrative purposes primarily. Past performance of fund is not a guarantee of future performance. This projection is also based on a 10% retirement contribution.

As you would have noticed, from the figures in the table, even without increasing your contribution amount, you would have earned exponentially more towards your retirement lump sum and your projected monthly payments at a pensionable age, by simply starting earlier.

Most individuals will need at least 30% of their current income, in order to live the life they desire during retirement, with a normal retirement age of 60 years old and life expectancy of 75 years and 80 years, for men and women respectively, in Jamaica. Of course, it could be more dependent on your idea of retirement, whether you choose to be a jet-setter or enjoy the simpler things in life; the price tag will determine how much you will need at retirement. Against this background, she encourages individuals to contribute the maximum 20% of their salary, which is also tax-free.

The pension expert shared, “By supplementing your pension contribution with a passive income stream, you can close the financial gap between living your dream life and the income needed for early retirement.”

Individuals can consider an investment property, which can be a standalone property, or convert your current dwelling to facilitate rental income during retirement. There are other solid long-term investments that can provide consistent income in the form of interest, coupon and dividend payments, these are payable on fixed income assets (such as repos), bonds or stocks, respectively; in addition there can be capital gains from the disposal of these assets, at a profit. Since these investments are for the long-term, it is important to make investments earlier in your career and pay keen attention, to ensure your investment is performing within or exceeding your expected returns. Your financial advisor can guide you on which option/s is best.

These investments will help you to supplement your income when you retire, thereby offsetting regular expenses, such as medical bills, utility bills, and other monthly/regular financial obligations. Additionally, this passive income stream allows you to not have to dip into your lump sum amounts that may have been invested to provide additional earning, in the event of unforeseen expenses.

Working a 9-5 job may be demanding and takes time away from the pursuit of other hobbies and interests that you may have, during your working years; it is, however, a good idea to keenly explore all your talents/skills, so you can monetize your passion/s. With careful time management, Steer advises that you can turn your hobby/passion into a source of income, without the burden of working full-time, during your retirement years. She also urges you to invest in acquiring skill/s and using your years of experience during your ‘retirement years’ to earn additional income. You could then monetize these avenues to supplement your retirement income, without the added stress that comes with a 9-5.

Get Started
To begin planning for your future, you can contact your financial advisor to help you determine how much you will need for retirement and craft a plan together, to get you there, based on your individual circumstances. To open a JMMB Retirement Scheme account, if you do not have a pension plan with your employer, visit any of JMMB’s locations island wide, with a minimum of J$1,000. Self-employed and small business owners can also establish a retirement scheme for themselves and their employees, by completing: a JMMB Retirement Scheme (RS) enrollment form; application for exemption on contributions; a copy of one valid identification, such as driver’s licence, passport and national ID and a copy of tax registration number (TRN), where a driver’s licence is not provided; proof of address and registration details for the company (in the case of a business owner).

Close your eyes and dream about the long days, when you will set your own agenda and march to the beat of your own drum, forgetting the demands of work and instead, enjoy early retirement. By starting to plan for your retirement early, supplementing your retirement contribution with a passive income stream and earning from your passion/hobby during retirement, you can be on your way to enjoying those retirement days, sooner rather than later.