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Is it too late to start saving for retirement?

Published:Sunday | April 29, 2012 | 12:00 AM

Oran A. Hall, Contributor

I am currently in my first year of university and I am 44 years old and unemployed. I will be printing some business cards to advertise my home computer business. Am I too late to start saving for my retirement? At my age, what can I possibly invest in to make sure I accumulate some sort of wealth that's in comparison with someone who had started to put aside from their early 20s? If the above are possible, what investment advice do you have for my retirement?

- Yesi

PFA: The earlier you start saving for your retirement the better, but it is better to start saving late than not save. You will not necessarily have a miserable retirement if you start saving at your age.

That will be determined by the success of your investment programme when you retire and whether you choose to have other income sources such as part-time employment.

I do not know what your financial position is because you have not given that information. I do not know, for example, if you have any investments, savings or debt.

What is certain, though, is that you would have a very great challenge accumulating as much as persons who started saving in their early 20s. Let us look at two examples and assume that you start your programme at 45 and your nephew starts at 25.

Both of you plan to retire at 65 and invest funds at the generous rate of nine per cent per annum tax-free at the end of each period.

In the first scenario, you each invest $3,333 monthly. In 40 years, your nephew would accumulate $15,526,832 while you would accumulate $2,226,287 in 20 years.

In the other scenario, both of you plan to have a sum of $30,000,000 at age 65. Whereas your nephew would need to save $19,756 at the end of every quarter, you would need to save $136,913.

Frankly, I cannot say now or next week what you could invest in to catch up with him.

Starting a business is not a bad idea. Many successful businesses had small beginnings. Your business could do so well it could outlive you.

This would be good on two counts: it would give you a source of income in your later years or you could sell it and use the proceeds to carry you through those years. You are about to start an advertising programme. I sincerely hope your business succeeds.

more advice

Here is some more advice. Manage the money you have now and what you earn in the future tightly. A budget would be a great help in this regard.

Make savings a priority so you can have funds to invest and funds available for emergencies. Strive to have a tax-efficient investment programme. Long-term savings accounts and unit trusts, especially the growth funds, are useful for this. Open a retirement scheme account as soon as you are able to and benefit from favourable tax treatment on the contributions you make to it and the income they earn. The financial institutions will be more than willing to assist you, I am sure.

But what if after all of these actions, you fall short in your retirement plans? If your health is good, extending your working life to 70, for example, would be an option to consider. Financial preparation is the gateway to your retirement freedom. All is not lost. In fact, the education you are seeking could well be the lifeline you need.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers free counsel and advice on personal financial planning.