Home' Trinidad and Tobago Guardian : June 8th 2017 Contents BG16 | FINANCE
BUSINESS GUARDIAN guardian.co.tt JUNE 8 • 2017
The risk to
Last week I focused on a looming
pension crisis and the fact that
this is a global trend to which
T&T is not immune. In the face
of possible pension plan deficits,
the unanswered question relates
to who will make up the short fall. That then
poses another question: at what age do you
plan to retire?
The truth is that some may actually not have
a choice to make.
For some that lack of choice is due to the
fact that they may be faced with a mandatory
retirement age. That age usually ranges from
age 60 to 65. There are others who may have
greater flexibility but may eventually be forced
into retirement through ill health. This is par-
ticularly applicable to self-employed people
and those involved in manual labour type of
So what about after you retire?
With advances in medical care it is quite pos-
sible and, in fact, very probable for a person
currently aged 30 to 40 years old to live well
into their 70s, 80s and even 90s. That could
easily mean 15, 20 even 30 years of post retire-
ment life. So how are you going to fund those
retirement years and where are those funds
going to come from?
A study conducted by the American Benefit
Research Institute suggests that the average
American would have to work into their 70s
and even 80s in order to afford retirement. This
is because, first of all, they have not set aside
sufficient funds for retirement and, secondly,
the costs for some of the basics of life, that is
food, transport and medical care have been
increasing rapidly and will continue to do so
and in the process outpace the rate at which
their retirement funds are growing.
The experience in T&T is likely to be the
For one, as suggested last week, it is im-
practical to rely on the State to support your
retirement lifestyle and there are a number of
issues that the average 30 to 45 year old is not
taking into consideration. Consider that peo-
ple are tending to get married later in life and
have less children that the earlier generation.
Also, property prices have skyrocketed over
the past 20 years.
Further, inflation is such that your purchas-
ing power has fallen by around 60 per cent
from 2000 to now.
The implication is that people are taking on
larger debts (mortgages), later in life and in-
flation is also reducing the level of disposable
income. Further, less children means that as
parents there are fewer potential candidates
to lend financial or other types of support in
your later years.
I have stated this many times before but it
You really have three options open to you
when it comes to planning for retirement:
either save more, invest more aggressively or
be prepared to work longer.
If you think about it, factors such as the job
market, the level of inflation and your current
level of debt will create challenges to your abil-
ity to save more. Your ability to work longer is
also a function of your employability at that
age and your health. The latter is something
that can present unforeseen challenges as the
cost of treating with medical challenges can not
only prevent you from working but also quickly
erode the savings that you have accumulated.
If you accept the challenges associated with
saving more and working well into what would
have previously been your retirement years,
then appreciate that the next option is to take
a careful look at how you invest.
Over the past few years we have seen invest-
ing take on two broad approaches.
1.Pre-2009 there was the chase for high
returns, which carried the perception
of no risk that have resulted in almost total
impairment of the invested funds.
2.Post-2009 the situation has morphed
into an investor that "does not like the
two per cent return but does not want to take
any additional risk"
The overall conclusion is that most people
simply do not know how to invest and approach
the subject from extremes based on greed and
fear. The end result is usually failure to achieve
their investment goals. That essentially is the
greatest risk to your retirement.
When we fail to understand this risk we end
up making poor choices. Most will not accept
their inability to take a sound, structured ap-
proach to the issue. They will also feel they
can do it themselves and avoid seeking out a
competent and experienced investment ad-
viser. When it does not work out (as is most
likely to be the case) they will instead conclude
that "this is not for me"
. By doing so you are
implicitly making the decision that you will
be working well past age 60 or that you will
be faced with a retirement lifestyle that is
significantly below what you currently enjoy.
Have you ever wondered why so many peo-
ple aged 50 and above get caught in financial
schemes? The answer is that at this age many
are faced with the panicked realisation that
time has run out and so opt for the most at-
tractive "get rich scheme" on offer.
There is a fundamental point to appreci-
ate. At every moment, in every stage there is
an investment strategy that can assist you in
achieving your financial objectives. Consider
the current scenario where most income funds
are quoting rates just above one per cent. Rates
have been low for the past eight years even
though they may now be trending upward.
If you simply remain fearful and stay in near
cash investments that will impact your ability
achieve the sums you need to retire comfort-
It could very well be that accepting a low
rate of return in order to feel "safe" is a very
high risk strategy in terms of achieving your
retirement goals. It is important to put your
investments and the returns on those invest-
ments into the context of what you are seeking
to achieve and adjust your strategy in order to
ensure that you stay on track.
A recommended approach would be to seek
out avenues that can provide you with the ex-
posure to the growth investments you need
so that you are still positioned to achieve the
requisite investment returns while at the same
time managing the risks of investing overall.
If you seek such an approach, considered
to be the middle ground, you will, provided
you are properly advised, find a strategy that
nothing, high risk or no risk, but rather seeking
out ways that you can achieve your investment
objectives in a manner that effectively manages
the risk that you face. Recognise that over time
strategies change and what works today may
not be as good or even relevant in a different
It all comes back to you taking the time and
making the effort to recognise what is required
and then stay the course the achieve your stated
investment objective. The alternative is work-
ing long past age 60.
Ian Narine is an investment adviser registered
with the SEC and can be contacted at ian.
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