Retirees concerned about how long their money will last
“I am retired — not tired.”
That was the bold statement of a retiree who has a part-time contact job, when asked last week how long she is planning to continue working.
It was an interesting conversation that pursued as she is gainfully employed and making a meaningful contribution to society. She is happy with this phase of her life, being able to work at her own pace. This retiree is relieved that she will not endure the workload demand and challenges that the millennials and Generation X must endure in pursuing the same career, in which she has over three decades of experience and training.
Are we witnessing the death of traditional retirement? Once upon a time retirees would work for as many as 40 years and then go home to take care of their grandchildren or enjoy a life of leisure and travel. A lot has changed over the past two decades. Retirees are far more concerned about how long their money will last in retirement. With an ageing population and a decline in fertility rate, the demography of the working population is changing. The fact is that many retirees have a lot to contribute to the workforce as leaders, managers, and trainers. Some engage in coaching and consultancy for companies to maintain their competitive edge and provide for effective and successful succession planning within organisations.
I also met with a married couple last week. The wife is a retired housewife and the husband is still working. He is past the retirement age but is securing investments for his grandchildren. As he currently enjoys good health he makes sure that his money is working for both himself and his family as he begins the first step in building generational wealth for the next generation. His wife remarked, “We should have started investing 20 years ago”.
This view reiterates that financial education from an early age in very important, and I can assure you that the little ones, like a group of inner-city children I addressed last week on the topic of money, are willing to learn about investments. They now understand the relevance of compound interest in growing their money and the negative impact of inflation on their savings. I encouraged them to share what they learned with their parents.
Adults should begin planning for their retirement early so as not to be a burden to their children in retirement. People who are not aware of the importance of planning for their future are likely to have a stressful time in retirement. The majority of retirees who return to work do so for financial reasons. Other reasons include boredom, remaining mentally and socially engaged, and pursuing new careers and interests.
With the advent of retirement schemes, otherwise known as individual retirement schemes (IRS) or personal pension plans, more and more employers have moved away from offering group pensions to their employees. Employers must contribute to superannuation/group pension plans. However, with personal pension plans, employers’ contributions are voluntary. Therefore, the burden of saving for retirement rests with the employees.
In Jamaica, some employers have changed their group pension plans from defined benefits (DB) to defined contributions (DC). In a DB plan, employers, provide employees with guaranteed income for life, based on a specified formula. With DC plans, pension income is based solely on the performance of the fund.
As more retirees return to work, the workplace is evolving into a multi generational workforce with a mix of youth, innovation, skills, knowledge, experience, and flexible working hours that will enhance the growth of industries and foster economic growth and development. The change in the financial landscape spans more than two decades.
The 9/11 recession in 2001 was followed by the 2008/2009 financial meltdown, next the impact of the COVID-19 pandemic. Fast forward to the war in the Ukraine — 2022 was one of the worst years for pension funds and historically a financial nightmare for investments globally. All the factors mentioned contribute to more retirees “unretiring” and changes to the retirement landscape.
Pre-retirees are becoming more aware of the challenges ahead as they may live for many years in retirement. The cost of home repairs, insurance, health care, food, and transportation costs will always be there to deal with. I recommend that adults in their 40s and 50s endeavour to supplement their pension funds by investing for the long term so they can be better prepared in the golden years.
A new retirement landscape has emerged. Be prepared.
– Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her 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