I overheard a conversation between two young ladies the other day, which got me thinking. One was recounting to the other that she was trying to encourage her mother to do less spending and save more for her future needs, but her mother was not being receptive. Her mother told her that she expected that her daughter would take care of her when she got old. She expected her daughter to be “her pension.”
As I listened to the conversation, I realised that this was probably a common discussion. Jamaicans generally have a tendency not to prepare properly for their retirement. Their children are often expected to go to school, graduate, find employment and then take care of younger siblings and their parents. It used to be common practice that couples would have many children, with the hope that their children would take care of them when they are old. Children were their parent’s “old age pension.”
However, the number of children per family is declining. The advent of both parents working; increased life expectancy; the reduction in the value of the Jamaican dollar; and the decline in real wages, have all changed family economics. Hence, it is less likely that working persons will be able to take care of ageing parents. Think about it, love and good intentions cannot actually pay bills or purchase meals.
What Can We Do To Prepare For Our Own Retirement?
- Start saving for your retirement now, by joining and contributing to an approved superannuation fund, or approved retirement scheme. Accept the fact that you will need to spend less. It will be difficult at first; however, you will get used to it, as it is easier to adjust your lifestyle; and make sacrifices when you are younger, with less responsibilities and obligations.
- If you are already a member of a company-sponsored pension plan, or a retirement scheme, then contribute as much as you can. The power of “compound interest,” the tax-favoured status of superannuation funds and retirement schemes make this the most efficient form of savings for Jamaicans. In addition, the interest earned on these funds do not attract income or other withholding taxes.
- If you are not a member of a company-sponsored pension plan, then consider joining an approved retirement scheme, and commence contributing now. Approved retirement schemes are offered by many financial institutions; and are licensed by the Financial Services Commission. You may call the FSC, or visit their website at: fscjamaica.org to learn more
- Increase your contributions to the superannuation fund or retirement scheme each time your income increases. By doing so, you will better ensure that your accumulated contributions at the time of your retirement will be adequate to meet your retirement expenses.
- Be prepared to work longer by adopting an approach of lifelong learning. The longer you are able to earn an income, the more likely you will be able to maintain your lifestyle. However, the skills that will be required in the future may be very different from the skills you have currently acquired. Hence, your ability to adjust to new technologies will be enhanced, if you extend and expand your range of skills. Consider the many free online education services such as, www.coursera.com
- Try to develop a second source of income stream. This should not be something which conflicts with your main source of income; but rather, something that you can do in your free time.
- Speak with a Financial Advisor (Contact the FSC for the list of licensed securities dealers). He or she should be able to help you to develop a financial plan which works just for you.
Preparing for retirement is not as daunting as it appears; however, it does require you to take action. Reducing expenses and increasing savings may seem impossible, but consider the consequences of not making that decision. Furthermore, saving for your retirement in an approved superannuation fund or retirement scheme will greatly increase the sum of the accumulated savings you will have, to make your retirement years independent of hand outs from others, enjoyable and dignified.
By: Stacey-Ann Mighty Whyte
Pensions Manager, JN Fund Managers Limited
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