If you are reading this piece, clearly you are not dead, expired or defunct; in which case we have in common that we are ageing. Slowly, quietly time slips away until the elderly time is upon us, then the noise starts. The fact that old age and ‘retirement’ comes to us all is obvious, everyone knows it’s true but like a big fat elephant in the room we are somehow able to ignore its existence.
Even a slow train comes eventually and the Boomer thing is the biggest of the slow trains with 77 million of them aboard. (High maintenance old folk with high expectations – expensive!). 77 Million aged persons beginning to fall out of the workforce and moving forward to retirements filled with leisure and fulfilment. Really?
Nasty reports and articles in the media are starting to tell a different story. UK daily mail reports that of the 7.3 million people aged between 55-64 years 26% have not one penny in a pension fund. (30% of those aged 45-54 and 47% of those aged 25-34 have no pension fund.) In 1967 8.1 million private sector workers had a company pension, in 2004 the figure was 4.8 million and today 3.3 million and dropping; all at a time when the population has increased by approx.19%. Recent market movement has seen the pension fund holding of millions of workers devalued to a figure less than the actual contributions made. (NZ. would be similar or worse proportionally.)
A recent Rabo direct survey (8/11) found that half of Kiwis don’t save and that, interestingly, it is not just low income earners who struggle to save, it’s across the spectrum.
Baby Boomers in their millions are going to be compelled to work longer; in fact there are a host of new considerations to be faced:
- We will have to accept personal responsibility for our retirement finances.
- Employer subsidised schemes are on the decline, it is unlikely that trend will reverse.
- We will be extending our careers or retraining for alternate/second careers. Simply for the money, or for a sense of social involvement. The process has already started in the USA.
- Retirement will be for a looooong time, maybe as long as 20-25 years – in any case far too long to be poor, scrimping and basically doing it tough.
- We are going to live longer, the good foods we enjoy here and modern medicine will see to that. (A girl child born today has a life expectancy of approx. 100 years. Frightening! For men it is a little less.)
- You can guarantee that Universal super will become a little less ‘Super” and probably a little less universal. A safe bet is on taxes increasing too. Qualifying ages will for sure rise.
- Even possessing the funds to be able to afford retirement is no guarantee of enjoyment, 20 years is a long time if you’re bored, unfit, lonely or infirm.
What to do?
The most difficult step is always the first one; recognising and accepting the true situation. The issue is far too big to ignore, you would simply have to take steps to address the problem. Actually taking any step, however imperfect is preferable to inaction; imperfect plans imperfectly implemented will generate a better outcome than doing nothing.
Acceptance of the responsibility for your own financial wellbeing inevitably requires adjustment to lifestyle, sacrifices actually. We are not good at that, we suffer from lifestyle inflation. It is self evident that saving won’t happen if spending rises at the same rate as income; often the spending comes first!
Diana Clement wrote this sentence for the Herald “Sometimes we can never get enough of what we don’t need” and I observe it to be true; new bigger homes, cars boats, exotic expensive foods and fancy Doodads. An inevitable consequence of saturation advertising.
We have come to believe we deserve big rewards, we are entitled to …… well just about anything we want and certainly entitled not to have to budget.
I suspect that our world has run out of wriggle room where spending is concerned; fiscal austerity will be the new focus as governments worldwide try to stop debt escalation. Entitlements today will become privileged ‘options’ tomorrow; ‘means testing’ at ever lower levels will become the norm.
Avoid the train smash in advance rather than try to live with the consequences in retrospect; it’s easier. There are all sorts of options including shares, Kiwisaver type vehicles, precious metals and of course real estate. All have a story to tell and can play their part as building blocks in your better future.
The folk today that we have helped to create retirement incomes and capital bases have in common that they all started in small uncomplicated ways and then made accelerated progress as their confidence grew along with their capital. Perfectly ordinary folk in all respects except that they were prepared to defer a little gratification and take a step to guarantee some improvement to their prospects. Without exception they overestimated their one year result but absolutely underestimated what they would achieve in 10 years. Ironically they did all start with Real Estate which ultimately gave the ability to invest in the shares etc.
It is not rocket science, not tricky, not even really hard. Results have been created with a simple plan, a little courage and stick ability over time; whatever volatilities the market has thrown our way.
Fact is that we will have to create an income whether times are good or times are tough. There is no alternative other than to live on the $260 – $340 a week of the Government largesse, or to ffffade away and eventually expire.
Real Estate is the option I understand, know and see work every day. It can play a part in creating an ‘Elderly time’ worth the experience; take some time and find a trusted adviser ask them show you how it has been a success for others.
Nothing to lose, all to gain; should be a no brainer!