Senior Manager at JN Bank with responsibility for the JN Individual Retirement Scheme (JNRS), Sharon Smith, is urging professionals to prudently manage their money to ensure they are prepared for retirement.
“Proper money management practices are an essential part of planning for retirement,” she advised.
“You need to ensure that you are managing the money you earn in the best possible way. You must remember that your pension savings alone will never be enough to retire comfortably on. Unless you had started with your first pay cheque in your early 20s, which most of us did not do,” Ms Smith said.
The licenced pension advisor said its good practice to budget and to follow a careful plan.
“Increase your financial IQ; prepare a will; get solid advice from a good financial advisor; and take care of your physical and mental health,” she advised.
With less than 10 per cent of the population having access to a pension upon retirement, Ms Smith underscored that if more Jamaicans plan for their golden years, families and the economy will benefit from their good habits, noting that retirement planning reduces poverty, as retirees are not dependent on the state or other family members for an income.
A prudently managed pool of retirement savings can also be used by government, Ms Smith pointed out, to finance infrastructural projects and healthcare.
“Saving for retirement is not about an age. It’s about the income you’ll have after you stop earning,” she advised.
“If you think of retirement in that context, then it means you could retire tomorrow morning if you choose,” she opined.
She noted that sometimes, circumstances, such as unforeseen accidents and mayhem, forces some people to retire before they intend to.
“Therefore, you need to be very serious about planning for retirement,” she urged.
Ms Smith said although savings in a retirement scheme may not be enough, it is a guaranteed and tax-deferred way of saving, which means that persons may make contributions before taxes are deducted, thus lowering their tax threshold. She said a pension scheme is a sure way to preserve savings, as under the pension law, persons cannot benefit from the savings until they have retired, except in certain cases due to poor health or disability.
In an individual retirement scheme persons may contribute up to 20 percent of their annual income.
“Individual retirement schemes, such as the JNRS, provide flexible investment options for persons who do not make a steady income, as it allows persons to make contributions to the scheme when income is earned, with contributions paid at least once per year,” she informed.
Miss Smith continued: “A prudently managed IRS offers diverse investment options that will provide protection for retirement funds from devaluation and inflation.”
But she said persons, particularly those with less than 30 years to retirement, should try to maintain savings and investments in addition to funds in an approved retirement scheme.
“You can maintain a savings account, which you can draw on from time to time, or as is often done in Jamaica, invest in real estate and earn income from rent. Stocks are also an option which can generate high yields,” she said.
She emphasised that maintaining good health is also critical to the lifestyle one will enjoy in retirement, pointing out that although people are living longer, incidents of lifestyle diseases continue to increase.
“You need to take care of yourself. If you don’t have health insurance or a critical health insurance plan get it. This will help to mitigate dipping into your pension funds in the event a serious health issue emerges,” she said.
Ms Smith reiterates that self-employed persons should not “be afraid to get advice from licensed and credible financial advisors to assist them with making the right investment decisions.”