Enjoy a comfortable retirement with right planning and preparation – Jamaica Observer

Keeping all your money in savings is a dangerous bet against inflation, since the purchasing power of that money decreases as inflation rises.

LIKE most people her age, a 63-year-old educator is looking forward to retirement after spending almost 40 years in the classroom.

The veteran educator, who asked that her name be withheld, is dreaming of "simpler days".

"Retirement is something I have been looking forward to for the past few years. My husband and I have been planning for it and one of our biggest dreams is to travel," she revealed.

But despite her plans, she admitted that she has been having second thoughts, as the recent price increases and the economic uncertainties caused by the COVID-19 pandemic have made retirement seem like an unattainable goal.

"Honestly, I've been worried. From the pandemic hit, I have been wondering if I will be able to go through with my plans of retirement and now the rapid price increases have made matters even worse," the Clarendon resident said.

"We're spending thousands of dollars more than we used to each month, just on simple things like food and gas. Life has gotten considerably harder in the two years. I worry if I'll have enough savings to live comfortably, if I retire in the next year or so."

Dr Ransford Davidson, business relationship and sales manager, JN Bank, says it's natural that retirees and those soon to retire are worried about inflation and the impact rising prices will have on their retirement savings.

"It's not hard to understand how inflation can be a daunting prospect for retirees. Even in normal times, anyone who's planning for retirement or is already retired worries about running out of money," pointed out Dr Davidson. "The potential for rising prices only adds to that baseline of anxiety. Even for people with the best-laid plans, inflation is an uncontrollable factor that complicates retirement planning."

Dr Davidson noted that while seniors might be concerned about their future, they can still enjoy a comfortable retirement with the right amount of planning and preparation.

With that in mind, he provides five ways retirees can navigate inflation:

Review your budget

Seniors must ensure they adjust their budgets to account for the rise in prices. This way, they can see how much they're spending and where they may need to cut back. For instance, scaling back on unnecessary driving can help cut down on gas costs. When food shopping it may mean buying less meat and more vegetables, or going to the market for produce instead of the supermarket. Comparison shopping can also help persons save money.

Keep your portfolio balanced

Diversify your investments. Having a mixture of cash, stocks, bonds and other assets is key. "Keeping all your money in savings is a dangerous bet against inflation, since the purchasing power of that money decreases as inflation rises," Dr Davidson said. To ensure you can sustain your financial independence in retirement, consider dividend-paying stocks, growth stocks and real estate. These are assets that are going to fluctuate in the short term, but they are designed over a longer period to give retirees diversification and protection against inflation risk.

Get rid of debts

Many senior citizens are still straddled with debt, including mortgages, credit card and even car loans. This debt will be an anchor as inflation rises. That's why paying off or paying down debt should be top priority for anyone worried about late-in-life inflation.

Keep working in retirement

If possible, keep earning. "Every dollar earned is a dollar you don't have to spend. Your biggest hedge against inflation is your human capital. That doesn't mean you have to stay employed at a job that is stressful or that you were looking forward to leaving," Dr Davidson advised. He said seniors can scale down to part-time jobs, tutoring or consulting. "You can even change industries all together and pursue a venture you've always been interested in."

Talk to a financial advisor

Finally, Dr Davidson said seniors should seek out the knowledge of experts in the financial field to ensure they're armed with the relevant information to make the right decisions. "You don't have to figure this out alone. There are experts who are willing and able to assist you to work out a retirement plan that's right for you and to help you hedge against inflation or any other economic shock on the horizon."

When food shopping it may mean buying less meat and more vegetables, or going to the market for produce instead of the supermarket.

DAVIDSON... it's not hard to understand how inflation can be a daunting prospect for retirees

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Enjoy a comfortable retirement with right planning and preparation - Jamaica Observer