Home' Trinidad and Tobago Guardian : August 17th 2014 Contents In the first installment of this series,
published at the beginning of July,
the Sunday BG posed the above
question. In the course of doing
research for the story, the Sunday
BG was invited to attend a half-day
retirement seminar hosted jointly by
The Consulting Interface Ltd and
KR Services Ltd. We were seeking to give read-
ers some formula by which they can calculate
what they would need to retire comfortably.
The organisers---who were initially
approached for input because of their collective
expertise in financial advising and actuarial
matters---suggested sitting in on the session
might be helpful.
Titled, Introducing Planning a Successful
Retirement, the seminar was targeted to people
10 years from retirement.
However, one representative of KR Services
said: "It is valuable for anyone who has started
working. The truth is you cannot start planning
The cross-section of attendees was varied.
Of the small group, some fit into the target
demographic, but others were as young as
their early and mid 30s.
Facilitator, Gail Roberts-Keil, took attendees
through the paces of the financial challenges
of aging and what one s objectives and goals
should be to avoid a decrease in standard of
The first of these was to identify the working
person s place in the financial life cycle.
There were five life cycle phases:
• Early career (25-40 years)
• Mid career (40-50 years)
• Peak accumlation (50-62 years )
• Pre-retirement (3 to 5 years before retire-
The course outlined how financial priorities
at the various stages were different to each
Speaking after the seminar, managing direc-
tor at The Consulting Interface, Lloyd Ince---
who has contributed occasionally to the Sunday
BG---explained the importance of considering
each particular stage in the financial life cycle,
because the associated expenses, and how well
you have prepared for them, can eventually
affect the quality of your retirement.
"When your children graduate from
advanced education, or when they go into
advanced education, that is a huge financial
outlay for any family. So, in your early career,
you have to look at when you plan for your
child to graduate, your income level, whether
you get married or not and when you start
having your children.
"Close to retirement, you normally need to
repair your house, the one that you bought
in your early 30s or mid-30s. It will very likely
involve changing your roof to get a lifetime
roof, which can cost you anywhere from
between $110,000 to $150,000. By that time,
you are anywhere between 45 and 49. This
is certainly a significant financial outlay."
The seminar gave participants critical tools
to be able to budget their regular monthly
expenses, as well as anticipate and set aside
money for unscheduled spending. The session
underscored the value of tighter control of
one s budget so that one would be better able
to handle big ticket items, like those Ince spoke
about, and still have enough for a comfortable
The importance of accurately forecasting
monthly expenses became very apparent later
in the programme, because this is a vital com-
ponent in calculating what would be required
for participants to retire.
To illustrate, Don is a 35-year-old manager
at a manufacturing company working for
$15,000 a month. He owns a house, is married
and has two children. Using the calculation
tools, Don was able to establish that his month-
ly expenses amount to $6,000, inclusive of a
mortgage, car insurance, private pension pay-
ments and other bills such as groceries.
He also needs to put aside at least $2,000
a month to meet expenses that he knows will
come up at different times of the year, such
as his car insurance payments, medical treat-
ment for himself and his family and school
expenses for his children. Don s current month-
ly need is therefore $8,000.
As Don gets older, however, some of these
expenses will be reduced. His children will
grow up. The life of his mortgage will end.
His car payments will also come to an end.
Therefore, Don now has to subtract these
items from his monthly expenses. At this stage,
he would be coming closer to collecting on
his annuity and will eventually stop these pay-
ments as well as he begins to collect. Assume
that after removing all of these expenses, his
monthly need is now $4,000.
Don cannot rest easily yet, because this
figure just represents what he will need to
survive at today s rate of inflation.
Impact of inflation
For Don to work out what he would need
to support himself and his family when he
has retired from working, he must have an
idea of what inflation could be like in the
future. The Central Bank Web site provides
information on rates of inflation ranging for
several years and it enables even the layman
to make an educated guess on what it might
be in the future.
Given that Don is now in his mid30s, he
has at least 25 years to retirement at 60.
Assuming a rate of inflation of 5.0 per cent,
in 25 years, Don will need 3.38 times each
dollar he needs now, to cover his basic expenses
in the future. When $4,000 is multiplied by
3.38, Don s monthly need at retirement will
be $13,520. Keep in mind that the rate of infla-
tion could either go up or down over the course
of the 25 years when Don retires.
If Don has adequately prepared and budgeted
over his working life, he would have had some
savings. He also would be receiving payments
from his annuity, possibly a pension payment
from the manufacturing company he worked
for as well. He may also have some income
from investments he made during the course
of his working life, whether this be in stock
or real estate. He also has his NIS pension to
Let us assume, Don will be receiving $ 4,000
a month from his private annuity, $3,000 a
month from his company pension, $3,000
from his NIS pension and $4,000 from invest-
ment income. Don s total income is $14,000
a month, $460.00 more than he would need.
However, if Don were not cautious about
his finances during the years he was employed,
he could very well find himself with a deficit
at a time when his earning potential might be
limited by health or skill set.
Ince told the Sunday BG that the forecasting
tools included in the seminar ultimately were
meant to be used as a guide to see how one
is proceeding and to make adjustments if there
was a deficit.
"The thing about it is that life is not a text-
book. The main thing in planning is it provides
you a rail to run on. It also gives you an idea
of how far off the rail you are when you ve
made a point of departure, so that you can
work your way back towards where you should
SBG6 FINANCIAL PLAN
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt AUGUST 17 • 2014
How much money do you
need to retire ? Part II
The Consulting Interface Ltd
Operating within the financial services
sector, The Consulting Interface Ltd
(TCIL), exists to provide an independent
source of competent advice, information
and assistance to corporate and individual
clients, with the purpose of helping them
clarify and achieve their defined
objectives. Through its consulting
interventions, seminars and specific out-
sourcing services, TCIL acts as an
interface to translate the goals of its
clients into manifested reality.
KR Services Ltd
KR Services Ltd provides actuarial
consulting services to a wide variety of
clients in the Caribbean, and beyond. Its
services are based on a strong values-
based ethos and a commitment to
human, national and regional
Its consulting services include company
and financial modelling, valuations,
employer and employee needs analysis,
implementation of accounting standards,
and risk management.
Links Archive August 16th 2014 Remembering World Wars 1-2 Navigation Previous Page Next Page