Financial Literacy 101 presented by Bank of Saint Lucia
RETIREMENT PLANNING & MANAGING YOUR DEBT
The month of October is designated as Financial Information Month in the Eastern Caribbean Currency Union (ECCU). The 2017 theme is “Retirement Planning: Making Your Golden Years Golden.” The theme is aimed at advancing public sensitization on the importance of preparing for retirement - from the very first paycheck and continuing throughout the years of employment.
Retirement is a distant goal for some or it may be right around the corner. Being adequately prepared will ensure a good quality of life after employment, the truly golden years. But the question remains, how many of those who reach retirement age are actually ready for this major life stage?
Retirement may seem like many years away for some, but saving now will make it more comfortable for you to enjoy your golden years. The key is to have a proper retirement plan in place and healthy savings. A firm understanding of your retirement benefits with your current employer and an assessment of whether your current savings are sufficient to meet your goals are a good start. Talk to your financial institution representative today for personalized guidance in identifying the best savings products available, as well as determining how much you will need to have a comfortable retirement life. Be prepared to plan for the different phases of retirement, for example immediate retirement – which affords opportunity to undertake new personal projects or experiences like travelling, starting that home garden or simply taking up a new hobby. Later in your retirement years there may be increased expenses on health and home care, which need to be planned for.
It is important to note also that a retirement plan is not just about crunching numbers, it is about mapping out your goals and ambitions.
Outline your goals
When do you plan on taking retirement? What do you plan on doing?
Crunch the numbers
Talk to your financial institution representative How much will you need (Take into account inflation – cost of goods and services are likely to be more in the future) Be realistic
Regularly revisit and review your plan
Goals are not written in stone, adjust if needed as circumstances may change
The truth is that most of us carry some form of debt whether it is by way of credit cards, a vehicle loan, medical loan or a mortgage. As you approach retirement, the aim is to reduce your debt. Many tend to focus more on paying off the debt and not on saving. It is critical to strike a balance between ensuring that debt is handled wisely and adequately saving to have a retirement that meets your expectations.
Get to know your debt and know the costs of using it. If you have more than one loan facility, list them all in terms of loan balances, interest rates and minimum payments. It is advisable to reduce the debt with the higher interest rate or the loan which is close to being paid off. Pay your bills on time.
Paying off a mortgage in full before retirement is a far less common occurrence. Instead, treat the monthly mortgage payment as if it were a fixed expense in your retirement plan. Other key retirement recommendations are to plan to make lifestyle changes to adjust to your new retirement income; track your monthly expenditure; and consider having a contingency savings fund for unexpected emergencies or unanticipated expenses.
Take control of your retirement planning. Failing to plan is planning to fail!