Being set for life, when you retire from your job, or the daily ‘grind’, is easier than you think, if you apply the ABC plan shared by Camille Steer, corporate manager, fund services, at JMMB Fund Managers, during a recent episode of the JMMB Goal Getter Live (webinar) series.
Steer, outlined the components of the ABC plan; audit your finances and take action accordingly; put a budget in place and consistently contribute to your retirement plan, while controlling your expenses.
“When you have this (financial) underpinning you will unlock the power to achieve all your financial dreams…as the ABC plan will help you to create financial habits that will allow you to feel energized, empowered and excited about achieving all your financial goals.”
The pension expert noted that retirement planning is best approached as a part of one’s holistic financial planning, and is not separate from the achievement of one’s other goals, such as homeownership; enjoying your dream vacations; buying a car and wealth accumulation.
She, therefore, outlined that individuals should take a similar approach to establish a solid financial base, starting with an emergency plan of three to six months’ worth of their expenses.
“What we are seeing as a result of COVID-19, is that more persons are going into pre-retirement earlier than planned and so they have less set aside. Therefore, for persons who are still employed they should use the opportunity to maximise their contribution, which can be as much as 20 per cent of their annual gross salary,” outlined, Steer.
In giving a sense of the amount needed during retirement, Steer, shared that the advisable amount is at least 70 to 80 per cent of one’s last salary at retirement age, therefore with the help of your financial advisor this projected amount is calculated.
To achieve this, a multilayered approach should be taken towards retirement planning.
The first element of this is, making contributions to the National Insurance Scheme (NIS), which is a mandatory payment for all employed and self-employed individuals in Jamaica.
This will need to be bolstered by a retirement plan which can take the form of an individual retirement solution or a superannuation fund/ group or organizational pension scheme. While the final layer would take the form of supplemental/ additional income such as investments or other passive sources of income.
Getting an early start, from your first pay cheque, is the best ingredient in your retirement planning; however, she charged the online audience not be deterred, if they have not already done so, “the next (best ingredient)… is to take action and start planning for your retirement now. Be proactive by having a conversation with your financial representative and move forward in a step-by-step manner,” said Steer.
Already heeding this call was co-presenter, Clifton Rookwood, a 20-year-old customer care associate, who is already on board with this advice.
He adds his own words of encouragement, “Start with even as little as $500 per month…it may not be a lump sum, but it will enable you to have something later on.”
He further stated, “set it as a priority for yourself since you are going to be the beneficiary.” In the event of your death, the named beneficiaries outlined on your pension enrollment form will receive a lump sum payment, consisting of your contribution and interest.
In reiterating Rookwood’s point, Steer shared that having audited your finances and established your budget, this will afford persons the opportunity to better exercise the next key ingredient, consistently contributing to your retirement plan.
In so doing, individuals can benefit from, what is defined as, the compounding effect, whereby your retirement contributions will increase by earning interest on both the contribution and the interest that is reinvested, on an ongoing basis. In demonstrating the compounding effect the following scenario was shared, during the live webinar:
Starting Age for Retirement Plan
Monthly Installation of Pension Contribution
Lump sum Payment at Retirement (age 65 years)
25 years old
J$ 13.7 M
35 years old
J$ 7.4 M
45 years old
J$ 3.7 M
Although noting that consistency is key, she admitted that life can throw curveballs.
As such, your retirement plan is flexible, whereby you are not penalized for missing a monthly payment; reducing the payment amounts; or taking a break from making these payments.
She cautions, however, that this should only be done in dire circumstances, as this impacts your ability to be set for life, after your active working life.
Adding, individuals should resist the temptation to forego contributing or starting a pension plan now, due to COVID-19. In keeping the discussion frank, Steer, charged individuals to imagine the alternative, “if you are struggling now and do not put anything away for your later years, can you imagine what it will be like then?”
Never Too Late
The pension expert, therefore, encouraged older persons not to be deterred; instead greater focus should be placed on maximising your pension contribution, in addition to identifying all other sources of income to supplement your pension.
With fewer years left towards retirement, you would need to bolster your retirement scheme with other investment solutions, in consultation with your financial advisor, and/or invest in assets such as real estate, which will provide consistent long-term income, in the form of rental income.
Steer, also advised persons to monitor their retirement fund, by paying attention to their statements, recognising that as your financial circumstances change, you may need to adjust your approach and contribution to your retirement plan.
During the live, on JMMB’s social media channels (YouTube, Facebook and Twitter), the pension expert also shared further nuts and bolts of getting started; the tax-free benefits of pension plans and how to customize one’s pension plan based on his/her needs, lifestyle, risk appetite and budget.
The JMMB Goal Getter Live series of webinars, held on Tuesdays at 8:30 p.m., via the company’s social media platforms (YouTube, Twitter and Facebook), is also available for rebroadcast within 24 hours on YouTube.
The series has explored a range of topical issues, especially those affecting individuals during the COVID-19 pandemic, including homeschooling, wellness, wealth building, relationship-building, money-making opportunities, personal branding, debt management, among other areas.
It is aimed at giving hope, lending expertise and sharing solutions that will assist clients and the wider public, to navigate the crisis; and serves as an avenue to address a cross-section of topical issues - thus underscoring JMMB Group’s commitment to being in its clients’ world.