Perhaps many of us are not even thinking about a retirement plan. For those of you who have a plan, congratulations.
It is really crucial for you to have a plan so that you will not be shocked when you reached retirement age and realize you still need a full-time job in order to cover your expenses.
Many of you have worked so hard most of your life and you really should not have to be working so hard at retirement unless you have to. Enjoy your life at retirement age. Do those things you want to do at your free will.
The first steps are to determine at what age you want to retire and to estimate how much money you will need on a weekly or monthly basis to cover your expenses upon retirement. I know that the Government’s compulsory age is 60 and there are special cases in which you may retire at age 55. However, you may discover that based on your savings that you have accumulated, you may have to work longer than 60 in order to cover your monthly expenses upon retirement.
Develop a plan on having funds available to meet your needs at retirement age. There are several means of achieving this in TCI; national insurance retirement, savings, entering politics for two terms, investing in a business from now, investing in pension plans and investing in stocks and bonds.
National Insurance Retirement Pension
The national insurance retirement plan is one option, however the funds received may not be adequate. In order to get the full retirement benefits from national insurance you should be aged 65 and it is based on the best 5 years of the last 10 years of contribution. However, you can elect to get your pension at age 60, but you will lose 30% (1/2% of full pension for every month from age 60 to age 65) of the pensionable amount if you do not wait until you reach age 65.
The minimum pensionable amount is 30% and the maximum pensionable amount is 60%. The first 10 years will be 30% and thereafter 2% for every year. Therefore after 15 years of contribution, you can get 40%. Beyond 15 years, it will be 1% and therefore you can get 60% after 35 years of contribution.
The current maximum ceiling is $4000, therefore, if you were paying on the maximum of $4000, your minimum pension will be $1200 per month and the maximum of 60% would be $2400 per month.
Public Sector Pension Ordinance 21.11
According to section 9 of the Pension Ordinance, a full pension for a public officer shall not be less than $6,000 or such higher amount as specified by Governor from time to time in a Gazette. I believe this is applicable to persons working in the public sector prior to 1992 when NIB was introduced. Recently the Government increased the pensions by 2.5% so the maximum amount you would get is $512.50 per month. (6000+2.5% increase)
In light of what our politicians are getting, civil servants deserve more. I encourage the civil servants’ association to have pensions as a top priority on their agenda.
Another option is for you to enter politics. In TCI, once you serve two terms or 8 years maximum, you qualify for a generous pension for the rest of your lives. However, please do not go into politics to get pension. Do it because you want to make significant change and improve the lives of residents of TCI.
Each week or month, put aside some money in a savings account with a bank and have limited access to it. Do not take a bank card because you should not remove funds from this savings account for your retirement.
Alternatively, an employer can develop savings scheme and have employees agree to deduct an agreed amount each week or month and put it in an employer’s savings account. You cannot touch it or borrow from it. You will only get it when you leave the firm.
If you want to save for a vacation or for another event, create a separate bank account.
Invest in a Business
You may want to consider investing in a business now so that by the time you retire, you will have accumulated some extra funds for your retirement.
You will have to decide the type of business you want to invest in. A major area in Turks and Caicos Islands right now is the real estate market where there is a huge demand for accommodations for both short term and long-term rentals. However, please be very cautious as the demand can change because the real estate market can be volatile. If you are going to invest in real estate, focus on quality not quantity. Do not build a lot of apartments etc. Build something very nice or buy something very nice that you can earn a lot of money from. You do not want to be stuck with too many apartments.
Another area to consider is in the hospitality industry. Tourism is our major industry and tourists want activities to do when they come in so you may to consider doing something to cater for the tourists.
Invest in Private Pension Plans
There are a number of private pension options you may want to consider. The options may be limited in TCI but certainly not globally. The pension provider can charge your card monthly or quarterly. However please ensure you pay your credit card so that you are not stocked with a huge credit card bill. This is one of way of savings.
Encourage your employer to develop a pension plan. Some may even match your contributions.
Invest in Stocks and Bonds
I am not an expert in investment in the stock market but this is an option that you may want to consider. Speak to a stock broker or a financial planner on more information about investing in stocks and bonds. I know that investment in stocks and bonds may be risky but as I was taught in my first economics class in college, the greater the risk the greater the rewards.
Investment in stocks and bonds should be about long-term benefits so as to derive a fixed income upon retirement.
Expedite payments on mortgage
If you are in a position to make extra payments on your mortgage, please do so. In this way, the interest payments will be less and you will not be trapped in a mortgage for 25 to 30 years. Wouldn’t it be nice when you reach retirement, that you do not have to pay any mortgage?
Obviously, there are many other avenues to plan for retirement. The article is to get you thinking and to offer you some suggestions.
Please ensure you start a retirement so that you can truly be retired and not having to work at retirement.
There needs to be consistency between the retirement ages for the Public Sector and National Insurance Contributors. When a Government employee retires at age 60, they will not get the full pensionable amount from NIB until age 65.
I also encourage the National Insurance Board to inform the general public on a regular basis about the retirement plans so that they can actively purse other plans to augment what they are getting from NIB.