September 22, 2021
By: Jhanae Winter
Let’s be real, retirement is a luxury everyone can’t afford, but to those that want to and can, prepare for retirement, should start now!
All this talk about saving money for your future, but how do you actually go about it?
Saving for retirement is more than taking a dollar here or there and adding it to a savings account (or putting it under your bed), although it is a good start.
Investment Manager Tiffany Cartwright said, “Preparing for retirement requires a long-term plan. Saving for retirement includes starting a pension plan and building up an investment portfolio.”
She further explained that only 30% of Bahamian companies offer pension plans and most of them are in the tourism and financial industry.
This means if you want to seek out a pension plan and start saving, it is good to be a part of an establishment that offers such benefits, or simply start an individual retirement plan on your own.
Ideally, the time to start saving for retirement is your first paying job, but it's never too late to save. Some people wait five years before they retire to start saving, which is too late Ms Cartwright said.
To young people in particular, it is imperative to start saving now and to not “put it off for later”.
The way to do this is by education, she said.
“A lot of people are not taught to save and plan for the future. We live in a consumer driven society. People know more about how to get a loan than how to save towards their retirement. If you are taught some basics about budgeting, saving and investing in high school and college, you are more likely to incorporate it into your life once you start working,” she said.
Saving sooner, even in the midst of a pandemic, can give you the security you need for the future.
The reason Ms Cartwright stresses saving and seeking other investment options is because NIB should not be solely depended on for benefits.
She explained that based on NIB’s actuarial report, it predicted NIB’s reserves will be exhausted by 2029. However the report is severely outdated and does not include variables such as Hurricane Dorian and the Covid-19 pandemic.
“The current contribution rate is 9.8% (3.9% employee and 5.9% employer). The actuary projections are alarming as 2029 is not that far away. If we continue down this path, it is likely that persons will have very little available to them from NIB in the future. This shows the importance of creating a nest egg for your retirement which includes many different sources of income: pension plan, NIB, savings and investments,” Ms Cartwright said.
She also mentioned NIB’s deficit which decreased to $6.713m in 2017. This deficit can affect payouts in the future and reduce the amounts available.
“In order to minimize the deficit, NIB increases the contribution rate, however this is likely not sustainable. There has also been discussion of increasing the retirement age from 65 to 67 which would reduce the amount that NIB would have to pay out,” she said.
The deficit number does not reflect Dorian or the pandemic.
The importance of saving is an understatement. Having other forms of investments such as shares, stocks, government bonds, land and/or real estate, is a good way to acquire passive income, before and during retirement.
This is the way forward in securing your future in a post covid world. There is no telling what tomorrow might bring, but it is best to be financially secure and have peace of mind to maintain your standard of living.