Oran Hall | Contrasting retirement experiences
I share with you today the retirement experiences of two Jamaican couples without a pension, but one was described as being perfectly satisfied with life in retirement and the other depends on neighbours and good Samaritans and is pleading for help to get a constant food supply.
Doesn’t make sense to you. Does it? Two Gleaner accounts explain.
The Gleaner of Wednesday, March 16, 2022, carried an interesting and sad story headlined ‘Retired farmer regrets not planning for the rainy days’. Just over 15 years ago, March 11, 2007, The Sunday Gleaner carried a column that I wrote, ‘Fulfilling a retirement dream: The story of a happily retired couple’.
We will look at the sad story first. Both the husband and wife are 84 years old. He is a retired farmer, and she was a housewife who used to sell coal to make a living. They did not make any preparation for life in retirement.
The husband is the sole caregiver of his wife who has many health problems, and he has his share, too, but they have no health insurance and income. His pain is palpable. He often feels like giving up, but his faith keeps him going.
His rainy day – retirement – has left him regretting that he does not have a pension in place, but he sounds a warning to those who are taking pension planning for granted and not beginning to plan for retirement when they are young and able to.
In the other account, the husband was 82 and the wife 74. He was a businessman and she a nurse who spent much time working in the United States. They maintained a long-standing programme of prudent financial management, avoided waste, monitored their expenses closely, bought good-quality items that could last a long time, avoided debt, and preferred to buy only when they could make cash purchases.
They followed a conservative investment programme focusing on tax-free instruments and shopped around for good rates. To ensure that they did not deplete their assets, they lived within their means and managed their expenses tightly.
In retirement, they maintained a reasonable social life, were active in their citizens association and church, maintained a low-impact exercise programme, and spent much time in their garden.
He died only a few months ago, and she is far more active and alert than many 89-year-olds. Very importantly, financial independence has not lost its importance after many years in retirement.
The two cases are clearly quite different, and it is not my intention to cast aspersions on anyone. I encourage you not to. People’s situations – including their financial status, social standing, and understanding of financial matters – differ. It is clear, though, that retirement can be a joyous experience, but it can be a nightmare as well.
Much has changed since the retired farmer started life. Today, we are bombarded with information on retirement planning and its importance, so there are opportunities for retirement education – and financial education. And we are more aware of the negative effects of not having adequate resources for retirement.
A big advantage today is a special vehicle available from several financial institutions – the approved retirement scheme – which has been provided to make a pension available to the many who do not have access to employer-sponsored superannuation plans.
It is open to the employed and the self-employed, who may contribute up to 20 per cent of their income to the retirement scheme. Contributions are not taxed thus reducing the portion of income that is taxed and, therefore, the amount of income tax that the contributor pays.
Another benefit is that the investment income earned on the contributions to the scheme is not taxed. Being invested by professional managers in a pool to which other members of the scheme contribute helps the contributor to benefit from one or more diversified investment portfolios and better able to weather the storms of the investment mine field than the portfolio of a single investor is able to do.
Currently, though, retirement income above the income tax threshold is subject to tax.
Of course, having other assets also helps, and as the happy couple above illustrated, other factors play a role in how satisfying life in retirement can be.
Although it is ideal to start preparing for retirement early, starting late is better than not starting at all. It means putting a greater portion of income into retirement savings than would have been done if there had been an early start.
Whether it is a retirement scheme or a superannuation fund, it is advisable to contribute the maximum allowed by law to increase the opportunity to get a good pension, particularly for individuals who contribute to defined contribution schemes such as the approved retirement scheme.
– Oran A. Hall, author of ‘Understanding Investments’ and principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel.finviser.jm@gmail.com