No more tension, but very little pension

By Finbar Garcia, LUTCF, FSS, MFA

Having assisted persons in both the public and private sector over the last 25 years in areas such as Family Income Security, Asset Protection, Life and Critical Illness insurance, the biggest and most underfunded area that clients at times regret dealing with early is Retirement Planning.

Imagine working for a company for all or most of your working life and when it’s time to retire, your expected retirement benefits were an insult.

These are some of the stark realities that many persons face but cannot do anything about it because it’s too late. “When you stop working, you stop earning – but you do not stop SPENDING.”

Where are you in this picture? For someone working in the public sector and based on the contractual arrangements made prior to being hired, retirement benefits are usually discussed before. This would give the employee an idea as to how to invest to enhance those benefits.

In the private sector, you can be, at times, at the mercy of the company as to your retirement benefits. I interviewed someone who recently retired from the private sector. This is the interview. The person’s identity and company were withheld as requested, but for now I will refer to her as Carol.

• Carol, good morning. How long did you work with this company?

Just after leaving school, at age 18. I applied for a job there. They were very nice and assisted me in developing myself, so it’s about 42 years I worked for that company.

• Based on your first salary in comparison to what was your last salary, would you say that your income increased comfortably for you?

Well, back then in 1980, things were cheaper and being single then, my income was more than enough. However, as time passed, I got married, my salary did increase over the years, not what I expected, but I had to budget to get by comfortable enough. My last salary was $9,500 per month.

• What benefits did that company offer you in 1980, more so to assist you with your retirement?

They had a pension programme, but I did not join until years after. I was about 30 years old when I eventually joined. They agreed to contribute something toward this plan, once I was also contributing, but I did not know the actual amount that they contributed at that time.

• What was your personal contributions towards this plan?

I started with $200 per month but did not increase it until about ten years after, maybe age 40 to $350 monthly.

• Carol, if you don’t mind me asking, how much is your personal pension benefit now? Not counting your NIS.

Small…very small! The pension I receive is about $850 per month plus my NIS. They did give me some money as a gift when I retired. I have that in a fixed deposit for the rainy days or medical emergencies.

• So, your last salary was $9500. Let’s say that you needed about 70 per cent of that to continue living comfortably. With that pension and your NIS combined, how are you managing with your daily and monthly commitments? There seems to be a shortfall of income of almost $2800.

It’s difficult! It’s not what I expected. I get support from my husband, but we really need to hold things tight together to be comfortable.

• Carol, hypothetically speaking if you were to do things differently, what would you have done? And what advice would you give to persons who are now joining the work force or even those who are working now?

Well, I would have seriously started that pension programme earlier and even invested in another personal pension plan. I would not have stayed with the $200 contribution for so long. I would have increased it often enough….and make the sacrifice. My advice to persons is simple. Make the sacrifice, invest as much as you can to build a better retirement for yourself…you deserve it.

• Since you retired, do you see yourself going back out to work?

Well, not immediately, but with the way things are going up in the supermarket, I am not sure if we can survive. So, I may consider some type of part-time job, just to make ends meet. Not that I want to, but I may have to.

• Carol, what are your views of Insurance Agents/ Financial Advisors?

{laughter}I did have conversations with insurance agents while working. I regret I did not take heed of what they were saying. If only I had seriously listened to them, my pension would have been much more.

You know when you are young, you don’t see retirement as something that you need to do then, it’s more about enjoying life and spending. Insurance agents are good people to talk to, even if you don’t start the programme with them immediately, you can always keep in contact with them.

• This is my last question. Based on your retirement dreams you had years ago, how do you feel about them now as you are retired, and can you live those dreams?

With this pension, those will remain dreams but really, I did have a little savings that I can still enjoy a vacation or two abroad, until that money run out.

Carol, let me thank you for your time, to really share your experience with me. I do hope persons would really take your advice seriously and start planning for retirement, to live that dream they deserve.

“Retirement is a time to experience a fulfilling life derived from many enjoyable and rewarding activities”

—Ernie J. Zelinski

Call me for more information on planning your financial future. Send your questions to myfinancialadvisor2020@gmail.com or call 620-1185.