Sun | Jul 15, 2018

Financial Adviser | Handling your finances the right way for stability

Published:Sunday | June 5, 2016 | 12:07 AMOran Hall

QUESTION: I just started working as a nurse and before I saw my first pay cheque I had set up a pension plan, an investment plan and insurance with an investment to it. And then there is student loan. I went with the NCB pension plan because I was told that when I become appointed they can just merge (not sure if that's the appropriate wording) the accounts. And because I was there and feeling good about the pension plan, I decided on an investment there too. My life insurance, plus investment, is with Sagicor.

Now I know this is a little reactive but what are the questions one should ask when setting up for financial stability in the future in term of investment and retirement plans? Was it important to shop around? Was I too eager in starting so early? Am I missing something? What are some of the policies I need to look out for? Is there more that I need to do? I don't regret starting I just feel like I am not doing something right or leaving something out. Thanks for your help. — Kadeen

FINANCIAL ADVISER: You have started off on a good footing addressing four major elements of personal financial planning: insurance, investment, retirement planning and money management — in particular, debt servicing. It is important that you are able to make the financial commitments you have undertaken.
I am not however, sure what analysis was done to determine the actions you needed to take but I would not be too concerned about that. Adjustments can be made over time. In fact, major changes may occur in your life that may make it necessary to make adjustments later, anyway.
Life insurance is important if you have dependents or debt. Before committing to it you should be clear if coverage is your main concern to determine the type of policy to purchase. Additionally, it is not unusual for some lenders to require that insurance should be in place to protect their interest in the event of the demise of the borrower.   
It is good to start investing early to give as much time as possible to accumulate resources and to even- out fluctuations which are a natural part of the investment process. Similarly, the earlier you start saving for retirement, the better. I would caution, though, that you make decisions based on your needs rather than on the basis of “feeling good.”
It is possible to transfer the contributions you are now making to your pension arrangement to your employer-sponsored pension arrangement as a lump-sum as soon as you qualify for membership. Those contributions and the earnings thereon will serve to enhance your retirement benefits when you retire. Should you choose to leave before you retire, under the current legal framework, you would be able to take those funds as they would be vested.
The situation would be different if you are employed to a health facility owned by the government as there is no segregated fund into which your contributions would go. In this case, it would be best to leave the contributions where they are now, but you would not be able to add to what you have accumulated at the time you become a member of the pension arrangement sponsored by your employer. 
Current legislation does not allow you to be a member of more than one registered pension arrangement at a time but the accumulated value of the contributions you are now making would be used to give you additional pension benefits upon your retirement. It seems, by the way, that you are now contributing to an approved retirement scheme.
These contributions and the earnings thereon are given favourable tax treatment. I hope the returns on your funds are positive.
It is important to ask yourself certain questions before setting up your programme and it is also important to ask questions of the persons offering services and products to you and I would expect that the financial services professionals would ask you many of the questions that you would ask yourself.
Among the matters for consideration would be the goals you want to achieve and when. Additionally, your income and financial commitments and responsibilities as well as your capacity and willingness to take risk and the paths available to meet your goals should be made clear.
It is not far-fetched to consider when you would like to retire and how you would like to live in retirement as this will inform your investment strategy for building a retirement fund.
You should not be shy to seek to know how qualified the financial professional is to offer you the service and products you seek and should be careful about making decisions on the basis of projections presented to you. There is no guarantee the assumptions made will hold.
It is important to read the fine print and to ask for clarification of issues that surface in you reading or discussions. Never allow yourself to be rushed into making a decision and be clear of the basis on which the financial services professional is being paid as well as the kind of service you are to expect. Ask for referrals too.
Yes indeed. Shop around. That is the best way to know what the market is offering. You do not want to make a commitment only to find that you have not made the most suitable decision. Only be careful you do not confuse yourself by having too much to ponder. At the end of the day, it is about you, not the person who is offering services and products.  


- Oran A. Hall, the principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel.