Confession time about retirement plans and goals
I’m going to commit sacrilege here. But it’s not as if I haven’t thought long and hard about it. So okay, deep breath, here we go: Contrary to what many will tell you, it’s quite possible to be financially together and not have a detailed written plan on how to fund your retirement — or even a retirement savings goal.
What brought this to mind recently was a comment by AMP executive Blair Vernon on a survey of people 18 and over who have not yet retired.
The survey found that 12 per cent have a written retirement plan prepared by a financial adviser, and another 6 per cent have a plan they drew up themselves. Half have no written plan but a clear idea of what they are planning to do. That leaves 31 per cent with no financial plan for retirement.
Vernon focused on the fact that fewer than one in five people have documented their retirement plans. “We put effort into planning events like Christmas or a holiday or watching a rugby match,” he said, “so its hard to understand why we put so little into planning for what might be a significant slice of our lives.”
People all over the financial world will be nodding in agreement. I wonder, though, how many of them have their own formal written retirement plan. I don’t, and I don’t plan to.
Here’s why. Even though I’m not all that far from the traditional retirement age, there are still too many unknowns. How much will I earn between now and then? How much of that will I save? What returns will my savings earn? And when will I retire — if ever?
Any numbers I would write in a plan would be guesses. Why bother? I’m content to tell myself that if and when I file my last column on my last deadline, I’ll total up whatever I’ve saved, guesstimate how much I can spend each year — and therein lies another huge unknown- and adjust my standard of living accordingly. While I enjoy luxuries as much as the next person, I know I can be happy with less.
That’s not to say I haven’t thought about how to fund my retirement — which puts me in the 50 per cent in the survey with a clear idea but no written plan. And I reckon that’s good enough, provided you’re salting away some money. While some people need written plans, others do just fine without.
In fact, I thought the AMP survey findings were pleasing, in that less than one third of respondents have no retirement plan. And I’m not even concerned about those people, unless they are over 40.
Don’t get me wrong. It’s great if young people join KiwiSaver and contribute enough to get all the incentives. Many will use some of their KiwiSaver money to buy a first home and then save for retirement, sometimes ending up as millionaires after decades of compounding returns.
But the young don’t need further retirement plans. In their twenties and thirties they should concentrate on education, buying and paying off a home, and perhaps financing a family. Getting all that set up is a good base from which to seriously save for retirement later.
In any case, my list of unknowns is nothing compared to the list for someone under 40. Anything could happen to them in the next 20 or 30 years.
Sorry, Blair Vernon, but retirement is not comparable with Christmas or a rugby match. I reckon your survey suggests New Zealanders are doing well enough with their retirement planning. How about congratulating instead of scolding us?
Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.