Many adult workers and retirees lack a planning mindset

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Planning for retirement is an individual responsibility and each plan ought to be customised to achieve specific retirement goals.

WHAT kind of money manager are you? Whether we know it or not, we are all money managers. But how are we managing our money?

Planning for retirement requires us to be good money managers. A good money manager is a planner. If you are a good money manager it means you are managing your financial affairs. For you to achieve your retirement goals you should have a planning mindset. This mindset doesn’t end at retirement — it continues.

My experience and training reveal that many adult workers and retirees lack a planning mindset. Some adult workers are struggling to make the minimum contributions to their pension fund while others contribute occasionally. At the same time there is little or no long-term investment to supplement future pension income.

Some workers bashed the importance of having a budget for retirement. Others are “living for today” with a view that tomorrow will somehow take care of itself. Immediate self-gratification seems more rewarding in the short term than having a comprehensive financial plan that covers retirement planning.

Some workers are expecting their employers to contribute more to their formal pension arrangements while they seek to contribute less. Planning for retirement is an individual responsibility and each plan ought to be customised to achieve specific retirement goals.

Having a planning mindset begins with visualising your retirement goals and implementing strategies to achieve the retirement lifestyle you desire. Workers with long-time horizons will find that putting a retirement plan in place in the early years provides confidence in achieving their retirement goals. It’s advisable for seniors who remain in the workplace to develop a planning mindset. Regardless of income and age, a planning mindset will ensure that retirement goals remain in focus, and provide the confidence booster that the working senior needs to finally feel in control of his/her future. Every action taken in the present is based on the retirement outcome envisioned.

The planning mindset helps working adults and near-retirees to think about how much money they need to save for retirement. How long will retirement savings last in retirement? Will emergency funds be adequate in retirement? Acquiring the services of financial advisors will go a far way in keeping retirement plans on track. Planning for retirement requires understanding the returns on investments and the increasing cost of health care. Periodic reviews are critical in the retirement planning process. A planning mindset gives peace of mind for the future and reduces anxiety and worry. Having a planning mindset is more than just having a plan in place — it’s about being consistent, saving and investing consistently, and being determined and disciplined to execute all phases and strategies contained in the plan.

In a recent Harris Poll survey, which was commissioned by Allspring Global Investments, 50 per cent of the retirees said they retired earlier than planned. This means they would have lost earnings and received reduced pensions. The report also showed that 40 per cent retired as they planned. Those who retired early did so because of health reasons or due to the decisions made by their employers. These reasons indicate why a planning mindset is crucial. Workers with planning mindsets must have contingency plans built into their plans for retirement.

A planning mindset augurs well for income stability. In Jamaica the majority of workers don’t contribute to a pension plan. This creates a vacuum for retirement income and many are in danger of imminent longevity risks. With an ageing population many workers are at risk of living far longer than they expected. All workers need to have planning mindsets to safeguard a retirement that allows them to live by design and not by default. A planning mindset provides financial security in retirement, enabling retirees to live many years in retirement without outliving their money. A professional financial advisor with experience in retirement planning can help you to develop a planning mindset.

Grace G McLean is financial Advisor at BPM Financial Limited. Contact her at gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. Email her at livingaboveself@gmail.com