I have been working for more than 14 years now. I joined my first job in July 2007.
Every July, I complete one more year of my working life. I never considered retirement at the beginning of my career; it was not on my mind. But this wasn't unique to just me.
Most people I met in service rarely talked about it, specifically those at my level. Retirement was three decades away- which seemed more like an eternity. So, why should anyone worry about it? The future is far away.
Over time, my view on retirement has changed. With 16 years to go, I often almost catch myself wishing I knew the thighs I know now, early on as a young man.
You see, 30 years of active service means a lot; it is 360 months of a man's life where he gets paid to do a job. It also is a period of peak physical strength and agility. Consequently, after 30 years, there will be no more monthly payments, and strength has dwindled.
The best way to view years of active service is to consider what one will be left with. There are two options. You can quickly retire and reap 30 years of saving and investing. The second and more scary option is to retire with little or nothing.
Unfortunately, most people end up with the second option. According to different savings statistics, four out of five people in India are not ready for retirement because they have yet to save enough that could last their retirement years.
The condition in other countries is almost similar and in some developing countries even worse. Less than 51% of Americans have at most three months of savings as an emergency fund. This means they are at risk of being kicked out of their home and going impoverished if they at any time lose their job.
Why Is Retirement Not Taken Seriously?
As much as I would love to cite research and reports from authority sites, I would love to answer this question based on my lived experience.
Why didn't I take retirement seriously?
So, I got my first salary in July 2007, but I made my first investment for retirement in January 2010, two and a half years after my first salary. I am among the lucky ones. Most earners go through their active years without ever investing a dime.
When I got employed, I needed to gain more knowledge about investments. The only thing I knew about investment was the word. The only form of savings I was involved in was compulsory: the EPF (employee provident fund).
With zero knowledge of investment, I had yet to learn I could have surplus money in the future from seeds I planted years back. The whole concept was strange to me.
To make matters worse, my colleagues and friends were exactly like me, dumb regarding investment and savings. We should have discussed these issues, but we never did. We could discuss a million things but never anything about retirement.
What about our senior colleagues? And I will tell you, they were worse. They were as clueless as us. The best of them were paying premiums on life insurance policies, which isn't an investment.
Perhaps one or two people knew about investment, but they would be the odd ones out. However, the topic itself wasn't just popular.
In essence, I had yet to learn what investment was about, nor did I have an understanding of what inflation was. I knew little to nothing about my expenditures, apart from spending a lot more than I earned.
Like most salary earners, I was like the poor dad in Robert Kisyosaki's Rich Dad and poor Dad.
How Did I Become Aware of The Need For Retirement Planning
I stated in the previous section that I only began investing more than two years after gaining employment.
So, what edged me towards investment?
I saw the condition of my parents. My mom is a housewife, and my father was a businessman who needed to do better financially. He had no investments except a house and some traditional investments in fixed deposits, insurance policies, etc.
My parents are well over 58 years of age and have struggled financially. I did not want to live like them, but even more, I desperately wanted to improve the financial condition of my family.
Fortunately, my parents provided the blueprint for a financially frustrating life. And judging from how I was living, I knew I was trodding in their path. So, change came quickly for me, or better yet, the decision to change.
I had also seen a lot of people in my neighborhood who seemed to have been financially stable when they were employed but suddenly began struggling after retirement. Many nearing retirement are pushing for an extension of the retirement age.
It gradually dawned on me that I would be in the same position these people are in a few decades. This realization woke me up to the reality of things. Thirty years, after all, isn't that far away, and when it comes, I had better be prepared for it financially.
Is Investment Possible From A Meager Wage?
When I began investing, one of the first mental obstructions I had to deal with was taking out money from my monthly wage, which wasn't sufficient. Also, even if I took out a percentage, it seemed relatively small and inconsequential.
However, I quickly learned from reading excellent books and listening to several financial gurus that wealth is built. First, there is the power of taking out a percentage of my money and saving it over time. Also, the power of compound interest ensures that little amounts invested over a long period can become mighty.
In essence, it is all about taking advantage of time. However little you think you are earning, you have decades ahead of you to keep aside a bit of that and invest it. When the future comes, you will be safe because your little investement every month have become massive with time and compound interest.
Common Mistakes When Planning For for Retirement
Investing only in safe options
The term "safe" is relative and is mainly determined by knowledge. Hence, when you hear people say they invest safely, they often mean that they invest only in what they understand. Unfortunately, most people need help understanding a lot of things about investment. So, even that which they assume is safe, in the long run, often becomes a bad investment.
So, you may be hard-pressed to put your money in a fixed deposit account. Yes, your money is safe, however, it isn't safe from inflation. In the end, the buying power of your money after years only reduces.
However, investing in stock might seem dangerous, but that is because you do not know how stock works. With the proper knowledge, you can invest in a stock or an index fund and have your money safe and protected from inflation.
People have too much of expectations
People invest primarily in equities to get rich quickly. I have heard many withdrawing their money when they don't see any movement in their stocks. They quit too early. Also, people expect too much from their equity investments; when that does not occur, they quit. So, if you can't wait for more than ten years, you should not expect any good returns from equity investments.
Investing without a target
This is one of the biggest mistakes when it comes to retirement planning. You must have an informed target. At the beginning of the article, I spoke about how I had no idea how much I was spending on expenditures in my early days. However, after tracking my spending, I was shocked.
Similarly, people are shocked when they realize how much they need for their upkeep in their old age. Hence, saving and investments must be made with a pre-knowledge of how much you would spend on yourself or your family after retirement. You can use this retirement calculator to get the idea of how much you will need in your retirement years.
People are investing without due diligence
People need to take investing seriously. They want significant returns without any work. They follow tips and tricks from other people and make the wrong decisions. When investing, you cannot outsource the responsibility of learning and studying. You need to fully understand why are you investing and what the outcome you expect from your investment. You need to study well before investing and only invest when it fulfills to be a good investment.
Retirement is a beautiful time in anyone's life; this is the time when you have to live a worry-free life with your family. And you can achieve this if you plan your finances well. So, please start today. Please share your thoughts on what and how do you plan for your retirement?