Retirement Planning: When You Are 50 & Over
Whether you plan to spend your post-working years as a globe trotter, take up a new hobby, or just enjoy life; the opportunity to just march to your own beat is probably the most rewarding part of retirement. If you are 50 years or older, and have not taken any deliberate action towards ‘upping your retirement game plan’, you are not alone, reassured, Camille Steer, senior corporate manager, JMMB Fund Managers. The good news is, it is never too late to start planning, so do not panic; instead START now.
• Start with the ABCs: Camille shared the first step towards your retirement planning journey is to audit your finances; establish your budget and stick to it; and cut expenses, where possible, as this will afford you the opportunity to consistently contribute to your retirement plan.
• Take Action Now: This is important as you have less than 20 years of actively working, if you opt for late retirement age of 70 years. The best approach is a multi-layered approach to retirement planning, start by ensuring that you are making contributions to the National Insurance Scheme (NIS) if you are self-employed or a contract employee who is not a part of a company pension plan; this is mandatory for employees of companies. Contribute the maximum 20% of your income to an approved retirement scheme (ARS). If you are currently contributing to a superannuation (pension) plan explore the possibility of also contributing the maximum of 20%. With less time to contribute to your retirement goal, you will need to be focused and consistent. In so doing, you can benefit from, what is defined as, the compounding effect, whereby your “pot of funds for retirement” will increase by the interest earned on both the contribution and interest reinvested, on an ongoing basis.
• ‘All hands on deck’: The retirement expert shared that supplemental income can be a game changer, in the form of investments in stocks, real estate, bonds, unit trusts, or investment property, or ‘investing in yourself’, via a part-time job or pursuing other passions. Highlighting, “investments that provide consistent cash flow are good options to consider, such as bonds that give coupon payments and stocks with attractive dividend payments, as these investments will bolster your income during retirement.” She added that during your 50s you want to focus on preserving wealth. Of course, select the best option, in consultation with your financial advisor, based on your unique circumstances (time horizon, risk appetite etc.), no one size fits all.
• Remain Positive: Although it may seem daunting, a positive mindset is key to achieving your goal and staying focused. Remember it is better to be late, than never start.
• Take ‘stock’ periodically: Your retirement fund statement, which is provided by your fund/pension manager, is a good tool to help you to monitor and measure your progress. If you see where you are off-track, all is not lost, Steer advises, “take stock of your expenses, investments and other supplemental sources of income and make adjustments where possible.”
Your Financial Planning Continues into Retirement
Life continues post-retirement and so should your financial planning. With that being said, Camille shared some pointers that will help individuals enjoy retirement, while ensuring that their money lasts their lifetime.
• Manage your expenses: Having a balanced approach to money management will allow you enjoy the best of both worlds – pursuit of your dreams and financial security. In this new phase of life, you want to be prepared for incidentals, such as: increased medical expenses; daily living expenses; taxes; gifting your family; and any emergencies, without compromising your comfort.
At the start of retirement, you have the option to access up to 25% of your pension savings, in the form of a lump sum retirement payment, while the remainder will be disbursed in monthly payments to you, over your retirement. Upon retiring, the retirement expert, Steer, cautions persons to resist the urge to splurge.
• Tap into NIS benefits: In the event of death, your family can access a funeral grant of up to J$90,000, which is paid on the death of an NIS contributor, pensioner or his/her spouse. Additionally, there is the National Insurance Pensioners’ Health Plan, which is a comprehensive medical insurance scheme that can be combined with your existing health care plan, so that you can maintain and manage the costs of your health care.
• Stay Invested: Although you have transitioned to a more relaxed pace, you can remain an active player in the ‘investment game’. It is best that you have a holistic conversation with your financial advisor about your changing needs, assets, debt and financial obligations, so that you can establish a plan that is best-suited to you and your changing circumstances. At this stage, your focus should be largely on maintaining a consistent income stream and preserving wealth; so stay invested and stay ahead of the game.
• Supplement your income: Similar to your pre-retirement years, you can supplement your retirement income. Having amassed years of experience and knowledge, you can put it to use and bolster your current retirement income, by working part-time or on special projects.
Although, you may be late to the game, all is not lost in planning for your retirement, assures Camille Steer, the key is to START now and adjust your lifestyle to ensure you are prepared for retirement.