Investments: Pensions.

 

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Photos by rawpixel,  Steve Long, Lukas Budimaier, chuttersnap, Rod Long, and OC Gonzalez on Unsplash .

 

Pensions give you peace of mind that there will be something to look forward to after your regular income is gone and you can no longer work.

Imagine being able to take advantage of tax free savings in a pension fund?  Imagine being able to budget a guaranteed amount each month investing years of diligent service into an organization, a career, or multiple jobs?  Imagine not having to worry about outliving your savings because you live 30 years past retirement instead of the anticipated 15 years?

Pensions provide this kind of peace of mind for workers who reach the age of retirement. However, I hasten to add that not every region of the world guarantees a pension.  Based on global retirement indices reports for 2017, more than 600 million individuals are 65 years and older today and they are creating pressure on established retirement systems.  Estimates by the World Bank suggest that this population will triple to 2.1 billion elderly by 2050 (https://www.im.natixis.com/us/resources/2017-global-retirement-index).  

Currently, countries in Western Europe, in particular Norway, Switzerland, and Iceland, continue to dominate the top 10 global rankings for retirement.  But, the United States and Canada dominate in the Finances and Health sub-indices.  

 But, it is still not a bed of roses for North American retirees.  Mostly public sector jobs and less than 5% of private sector companies provide pensions in the United States.  They have been replaced with the 401K, which arguably does not effectively provide the kind of coverage that earlier generations of pensioners had enjoyed.

However, where possible there are some wonderful reasons for investing in a pension fund.  Here are just a few suggested by Matt Carey (2017), former Policy Advisor at the US Department of Treasury, who laments the decline of pension funds over the last generation in the United States:

1. A pension provided protection from market risk. 

2. A pension provided protection from outliving your savings. 

3. A pension lets you budget your retirement expenses.

4. It’s hard to translate the assets in a 401(k) into a steady monthly benefit.

5. A pension incentivizes you to be healthy.

(https://www.forbes.com/sites/mattcarey/2017/06/05/5-ways-a-401k-isnt-as-good-as-a-pension/#88a2a46567f2).

Hindsight is always 20/20, so we should take the time to learn for ourselves how we can prepare ourselves for retirement.  I had a brief interview with my colleague, Ms. Cooper, a Pensions Consultant, about why Jamaicans should take advantage of pension schemes available in the country.  Consider her sage advice for yourself at https://www.youtube.com/watch?v=teqFLRZtd-I .  

Understandably, various regions and organizations arrange pension schemes in a variety of ways.  So, it is always good to talk to the experts and discover why investing in a pension fund in your region provides added financial security for you, not just in retirement, but also in disability or other unforeseen circumstances.  

The best advice in today’s circumstances is to go with a mixed method strategy when preparing for retirement.  For example, one strategy shared involved having 34% of their total assets invested in a pension fund because they would be able to take at least 25% of the saved amount completely tax free (http://www.retirementinvestingtoday.com/2010/03/are-pensions-good-retirement-planning_07.html).  But, find out what works best for you and your family!  Planning ahead is always best.

And, planning for retirement is indeed smart investing.  Don’t forget to visit http://www.lulu.com/spotlight/KeishaAMitchellPhD and https://www.youtube.com/watch?v=yHGm_Vc-MtM .

Photos by Sharon McCutcheon, Serhat Beyazkaya, and Vidar Nordli Mathisen on Unsplash .

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