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Afraid of running out of money?

Steady growth: saving a little every month is a great way to build a nest egg

Is your investment plan realistic? A 2017 study by Aviva in the UK revealed that 1.3 million people viewed “winning the lottery” as their only plan for retirement. The article discusses common mistakes that people make when planning for the future and how best to invest their money.

One of the most unexpected traumas of later life is running out of money, especially in retirement. If you are presently in your Thirties or Forties this may not seem too worrisome looking forward but once you are in your Fifties and Sixties it becomes perfectly clear that the ability to turn the clock back has gone.

Obviously, coming to grips with this financial issue is critical and the sooner that you begin to investigate whether your current financial plan will see you through the long haul, the more likely it is that you will be comfortable in the years ahead.

So, the earlier you can look ahead to those years and forecast your financial needs — income and expenses — the better chance you will have to meet your goals. The longer you put it off through fear of finding out that you simply will not have enough or that you’re just scared of getting older, the worse it will be.

In our workshops, the comment we hear most, especially by the younger age groups is: “I would love to save but I have nothing left at the end of the month — every month.”

That may very well be true but with a review and an honest evaluation of your current expenses most people can normally find a little bit extra every month. The problem many people have is that even when they can set aside a small amount of money regularly, they have no idea where to invest (because savings rates are so low) they take the attitude of “why bother” — then buy that extra latte.

It doesn’t have to be that way.

We have always advocated that Voluntary Contributions into your employment pension fund is a great way to save for the future. It is professionally managed and forces you to discipline yourself to save every month.

But beware that in today’s economic climate where defined contribution plans are the norm, as opposed to years ago when defined benefit plans were the standard, the investment decisions are yours to make. Your pension provider will typically offer a basket of mutual funds to choose from — and they will have been correctly researched — the final decision about which mutual fund to us is yours, and yours alone.

So, in some respects, you are handling your own investments and therefore the need for a clear knowledge and understanding of investment terms and procedures is important. It’s called financial literacy and it is something well worth your time and effort to comprehend.

Nonetheless there are other options open to you that are worth investigating and understanding.

Starting your own personal investment portfolio allows you to slowly build up equity, but also affords you the pleasure of choosing how you want to invest. While some people call it “playing the market” we tend to take a more conservative approach and usually suggest looking for a stable and well-managed mutual fund.

It is risky to think you can invest in the stock market yourself — directly buying shares in a large company. Not impossible of course, and if you like the idea then go for it. But because your funds available for investment will be on the low side — and you’d prefer not to lose them on a gamble, probably better to use the mutual fund approach.

While increases in the value of the mutual fund may be “low and slow”, the mere fact that you are actively investing, increases the likelihood that your portfolio will accumulate over time. The key to this form of investing is to discipline yourself to put away that little extra every single month and if you can do so online then even better.

We call it “click and save”.

Interested in learning more? The upcoming workshop at Butterfield Bank will explain how the saving routine can work and how, by using reliable mutual funds, the investing business can be very satisfying.

This might not make you a millionaire overnight, but it will give you peace of mind that you are doing everything you can to look at your financial future properly. That alone is a very satisfying feeling.

Bill Storie and Zuri Darrell, vice-president, investor services, at Butterfield Asset Management will present a free workshop entitled “Are you happy with your investment plan?” Butterfield Bank, Second Floor Reid Street entrance — February 28 from 5.30pm to 7.30pm. Light refreshments will be served. For more information and to register visit the website, http://bit.ly/2DBuIZZ

• Bill Storie is CEO of The Olderhood Group Ltd, a Bermudian company and exclusive Bermuda partner of Career Partners International, with more than 350 offices worldwide. He is also producer and host of The Ozone a weekly radio show on Magic 102.7FM. He can be reached at www.olderhoodgroup.com or Bill@olderhood.com