Retirement as a topic for anyone below 30 is as boring as the imagination of what one shall be doing at the time it comes round. Lining up to cash pension cheques to a 25-year-old is akin to watching paint dry.
During various stages of our lives, we envisage what our most important lifetime decisions are which schools to attend, career choices, who to have as a life partner and the list goes on. But anyone above 50 will tell you that the biggest concern in their life is how they will survive post retirement.
In the past weeks, I have been part of two intuitive discussions on retirement. I have listened to senior citizens looking forward to a blissful retirement and on the flipside those dreading it so much they wish the legal retirement age could be raised so they can continue to “plan” for their post-retirement life.
Amidst all this, my own self-reflection has been found me wanting on retirement planning. Yet I have access to all sorts of information that can guide me on how to plan for the time when I will not be as productive as I am today. I also tried to poll around my peers and close to none has any plan with a 30-year outlook for self-sustenance. The more inquiries I made, the more worrying the picture got. We simply do not plan for retirement.
Many of us think it’s an issue too far off to address now and some even have it in their minds that they will not live long enough to enjoy retirement (or to suffer the repercussions of not planning for it).
When to start saving for retirement
So, at what age should one start planning for retirement? The retired generation says one should start planning for retirement as early as possible which translates to just after university and before your first paycheque.
The predominant answers among the younger generation is that one should start planning for retirement “after attaining 40 years”, “after getting married”, “after getting a family” loosely translated as-“Retirement planning is none of my business right now seeing that I am still young”.
With life expectancy increasing through improved healthcare and security of person one can expect to be in retirement for about the same time they will be in employment. Taking average employment life running from 25 to 35 years and retirement from 56 to 85 years, it becomes clearer how much attention we all should be paying to the latter 30 years of our lives.
If one saved enough during each year of their most productive years to cater for the same single year during retirement, we would barely cover costs of survival, without factoring issues of inflation, the dependency of spouses and that of offspring. One cost that is certainly not going to come down is that of education. With many of the post 1970’s generation opting to have children much later in life, after securing MBA’s and stabilising their careers, retirement age is bound to come knocking at the worst possible time, as the children join university.
It has been my experience that education post high school could be 10 times more expensive than that of all the prior years combined. And that is just one of the many demands on an average middle class family.
So what do we do? Do we live solitary lives filled with the fear of becoming dependent on our children after we retire? No. We should plan to live a decent life with the future in mind. Many a person will wonder whether they will ever get to see their 85th birthday, therefore pouring scorn on the whole debate. I say to them, should the 85th birthday come and find you did not plan for it, it will surely and truly be a sad retirement for you (or a very burdensome one for your family).
The single factor that works at odds the most to retirement planning is current consumption. The most brilliant arguments are made for this state of affairs. Some so brilliant they even warrant acronyms like YOLO (You Only Live Once), meaning, consume what you earn since the future is not certain. Most of the post 1980’s generation live for today. This mindset is further characterised by the need for quick money to finance, you guessed right and more consumption.
I am not a crusader against people spending their hard earned monies, since aggregate household demand is what drives the economy. However, I am continuously being woken to the fact that if we continue allocating 100 per cent to current consumption, we risk creating a trap for the generation after we have retired, 10-20-30 years from now.
For those who are just joining the workforce, it is easier in absolute and psychological terms to instill the discipline to save a portion of your earnings with a 20-year view before you receive your first paycheque. The biggest fallacy many of us suffered from was that it gets easier to save as your monthly income grows.
It does not. It gets harder. To prove this, ask anyone earning more than Shs5 million if they garner savings of Sh1 million a month. I bet you, they struggle to save Shs200,000. It is easier to save Shs50,000 out of that initial salary of Shs300,000 and it also builds the discipline to handle the bigger paycheques.
The focus of this article is on the new joiners to the work force. However, the issue of retirement planning touches all those who have not started putting something aside for the later years. Start planning now to survive the dependency burden which no parent wants to load on to their child.
The writer works with African Alliance, Asset Management.
SOURCE: Daily Monitor