I am a 33-year-old young woman who is employed part-time as a lecturer. Could you guide me on how to plan wisely for my retirement from now? My salary is $40,000 per month and I do not pay rent.

- Kay

PFA: Is it not refreshing that you are having thoughts of planning for retirement at your age? The beauty of starting early is that you can build up a strong retirement fund with little pressure, and there is room for recovery if there are any missteps.

I can only give you some very general guidelines because you have said so little about yourself and your plans.

First, determine at what age you expect to retire. Knowing how long you are away from that time will play a key role in determining how much you will need to save; the earlier you retire, the less time you have to build up resources and the longer the time over which they must extend.

Although you cannot say how long you will live, you need to plan the length of your retirement. The average life expectancy of Jamaican women is about seventy-six years. If you come from a family of long livers, it is reasonable to assume you will live long yourself. It is better to have more than you need than to outlive your resources.

Lifestyle

Determine what retirement lifestyle you want. You will, in all likelihood, want it to be at least on par with the lifestyle you are used to. If you know how much it costs to live now, you are in a good position to know how to prepare to live then. That is not to say you can say from now what it will cost then, because your finite human mind cannot know what inflation rates, investment returns and incomes, among other things, will be in the future.

Where will your retirement income come from? Will you be banking heavily on investment income or business income if you choose to start a business? Do you plan to take full-time employment, which means you may be able to derive a pension from an employer-sponsored pension arrangement? Remember, too, that contributing to the National Insurance Scheme makes you eligible for a small benefit.

Bear in mind that you may have to fund an income shortfall at some point. This may take the form of increasing investment income by saving more or increasing risk. You may prefer to develop additional income sources by using your skills, in which case you need to examine your inventory of skills to determine how you may profit from them if required.

Orient yourself

You may have to orient yourself to accept retiring later than you want to if your plans go awry, or to go into partial rather than full retirement. In a worst-case scenario, you may even have to contend with scaling back your expected retirement lifestyle.

Even at your age, you need to consider if you would want to leave a legacy for relatives and others or whether you would prefer to have your resources to use for your benefit during your lifetime.

If you plan to leave a legacy, would you want to have life-insurance coverage to provide funds for the transfer of assets to your beneficiaries, or would you prefer to own assets in such a way that some of these issues can be by-passed?

The quality of your life in retirement can be impaired by several factors, some of which I will mention. Insufficient savings ranks high on that list. The key to financial independence in retirement is adequate savings.

Delay is another. Many retirees face hardship in retirement because they started their retirement-planning

programme too late. A late start often makes it necessary to divert a high proportion of income to savings in the pre-retirement years.

Change in personal and family circumstances, including changes in health, marital status and family size may affect the retirement years.

Prepare for the worst

As much as you can, protect your health, but prepare for the worst by putting in place proper arrangements for health-care costs and disability for now and later.

Changes in the economy and financial markets can seriously impair your retirement lifestyle. As protection, diversify your investments. In fact, become a member of an approved pension arrangement to benefit from the favourable tax treatment given contributions and the income earned thereon, and the benefits of professional management and diversification.

So you want to plan wisely for retirement from now. Start your programme now. Do not delay, and stick to your programme.

For free advice and counselling on money management, email: finviser.jm@gmail.com.