Most people prepare for retirement at the last minute
Many in the public or in the private sector seldom discuss retirement and make the mistake of preparing for it only when they are close to retirement, according to experts.
Retirement crosses their minds sometimes at the tail end of their careers without making any plans for the future not knowing what to do when it happens. A panel consisting of professionals and experts discussed at length the issues relating to retirement last week. A panel discussion was held at the monthly meeting of the Sunday Times Business Club at the Kingsbury Hotel in Colombo.
Former Vice President of Singer International and former Chairman Singer Sri Lanka Hemaka Amarasuriya said when one does not plan retirement early it can be problematic not knowing what to do with the available time in hand apart from other issues such as financial and health issues they face.
But time is the biggest issue they confront with retirement. He said the positive side of retirement was when you get the chance to live their life fully by engaging in pursuits that were planned prior to retirement.
“I look at retirement as something with a positive outlook and not as something negative. After retirement I formed a Bridge Club in our family circle where we get together once a week.” He stressed the importance of staying active after retirement to maintain a healthy lifestyle. “Most people sleep a lot after retirement and that is the worst thing that can happen to them.”
He opined the retiring age should be extended up to 65 years as people become more productive at that age. Health plays an important role in the wellbeing of persons and it is the stress factor than affects them badly than otherwise being physically fit. “When you work you cannot avoid stress but after retirement one has to avoid stress completely by slowing down the pace of activity.” Referring to investment he said there is potential in land and agriculture businesses.
Manjula de Silva, Chairman of the National Insurance Trust Fund Board and Member of the Securities and Exchange Commission, said that retirement has different connotations to many persons. It differs a great deal from person to person. Persons need to plan their retirement early so that when they retire they can carry on with the lifestyle they enjoyed without being stymied by financial burdens. “Some may want to lead an active life by travelling a lot while others would prefer to lead a quieter life after retirement.” Referring to compulsory retirement benefits for employees such as the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF) and gratuity, he asked whether it would be sufficient enough to maintain the same lifestyle that they are accustomed to.
“One has to have a large retirement fund out of which to generate an additional income to maintain the same lifestyle they enjoyed before.” But as the retirement fund remains static and does not grow it is advisable to use some capital of the fund to generate a further income by investing in other financial instruments. Life insurance is a compulsory way of saving until the policy matures. Annuity investment is another product where a total lump sum is invested and where the investor is paid interest every 10-15 years. Investing in Treasury Bills, Bonds, Debentures, Unit Trusts and long term investment in the stock market is advisable, he said
Ravi Abeysuriya, CEO and Group Director Candor and Advocacy Chair and Board Director of CFA Society Sri Lanka, stressed the importance of having financial resources when one retires. The state sector employees who retire at 60 years of age with a pension of 70 per cent of their salary will find it difficult to lead the same lifestyle with soaring inflation affecting their pensions. “When one retires at 60 they perhaps live for another 20 years. The critical point is when private sector employees retire at 55 years and find it difficult to eke out a living. But the informal sector employees without EPF and ETF are the worst affected lot which is not an easy circle to square. When comparing with other countries, there are many social benefits for retirees in those countries. The other challenge a retiree faces is how to preserve the retirement fund, a daunting task as inflation erodes the capital up to 60 per cent over a period of time.”
He said investment advice is lacking in the country and urged people to have different investment portfolios to stay afloat. “Investment advice is a rare commodity and many organisations are not bound by a code of ethics to advice their clients.” The better option would be if one has US$50,000 one can invest it outside Sri Lanka in a lifetime. Investing in land pays a better dividend as land is a scare commodity. However the risk involved with liquidity is that one cannot encash it in a hurry.
However the poorest of the poor invests in gold so that they can sell or pawn it when they need cash. He said many stock market brokers work on commission basis and weren’t interested in the short term and long term needs of their clients. The club is hosted by the Kingsbury Hotel Colombo.