Shirley
Dennise Williams, Staff Reporter
"You ought to start retirement planning from the first day you start working, however, if you have not done so, then the time to do so is now."
SANDRA SHIRLEY, president of First Global Financial Services (FGFS) made these comments during the FGFS/GK Funds Retirement Seminar at the Terra Nova Hotel on Wednesday.
Ms. Shirley sought to dispel several myths surrounding retirement planning.
MYTH#1
I have way too much going on in my life to even think about investing.
This is one of the most destructive thought processes and Ms. Shirley explained why. "Time is one of the most important advantage of retirement. Procrastination can be a costly price when it comes to retirement planning."
To demonstrate why the time is now, Ms. Shirley gave this example. "Let us look at two investors. Michael Brown and Sharon Reid who both start working at 21. Michael invests US$2,000 per year for the first eight years and then adds US$862 in the ninth year. He then never puts in another cent, but neither does he withdraw any of the money invested.
"On the other hand, Sharon doesn't start investing until her ninth working year and she starts with US$1,138. From years ten to forty she invests US$2,000 per year until she retires. In all, Sharon invested US$63,138.
"They both earn eight per cent. At the fourth year when they both retire, who has more money? They both have the same amount of US$279,781!"
Note that Sharon had to contribute nearly four times as much as Michael to get the same result. Ms. Shirley explains, "All we are saying here is how important time is in setting aside for your retirement."
MYTH #2
I trust my company's pension plan to take care of me during retirement.
"Putting all your eggs in one basket is destructive. We do advise that you take advantage of your five per cent salary deduction toward pension. But do not let that be your only retirement plan."
MYTH #3
Since I am self-employed, I am going to invest every dollar in my business. And so the business will provide the rate of return that I need.
Again, Ms. Shirley admonished the audience against this type of thinking.
"Many people do not even take a salary out of their business. Every thing goes into the needs of the business; but what about the future? It is not just about working for money, but getting your money to work for you."
MYTH #4
I only want to invest in 'safe' Government paper or fixed deposits.
Ms. Shirley said, "We at FGFS have clients that only want money market investments. No matter what, they have all kind of reasons why they will not invest in equities or any other investments. They don't care about inflation or its deterioration on their purchasing power."
By way of example, Ms. Shirley spoke of two investors with US$100,000 to invest - Martha and Zahra.
"Martha is ultra conservative. She leaves her money for 25 years on money market instruments earning six per cent. Zahra on the other hand, is aware of the benefits of diversification. Over the 25 years, she invests in different instruments with different results. Some give great returns but others do not.
"But who is better off after 25 years? Well, for her 'safe' investment, Martha earns US$429,000 while Zahra is rewarded for her risk taking with a return of US$962,000."
Although, Ms. Shirley said many would be pleased with Martha's return, it does not account for the impact of inflation.
She urged the audience to consider diversifying their invest-ments so as to earn the maximum from their retirement monies.
"It is not a question of when you are going to retire but how. Consider investments such as mutual funds that are more likely to outpace the rate of inflation for long term savings goals."
And, by law, the average age of retirement in Jamaica is 63 to 65 years old; however many persons want to retire even earlier than that. "The Ministry of Health says that the average life expectancy is 75.9 years and so if you retire early (at 50), you have 20 years for your money to support you."
She advised the audience to make an appointment with a financial advisor so that they can map out the strategy for their ideal retirement.
Letter received dated May 25, 2005
Dear Editor:
After 39 years of service, can $6,276.56 monthly pension fill one prescription?
- Frightened pensioner
When planning your retirement, ask yourself the following:
How long until I retire? What will my life look like when I retire? How much will it cost to get by on a daily or monthly basis? What do I need to do today to prepare for retirement? Do I have an emergency fund of six or more months worth of expenses? (This will be financial cushion so that your retirement funds will remain untouched).
