I cannot afford retirement…

Ask any young professional how much they are saving for retirement or if they are saving at all. Many will stare at you, laugh and tell you they are still young and have lots of time to save for their retirement. As a 29 year old young profession working in the leading telecommunication company in Lesotho; thinking and worrying about my retirement which is 36 years away shouldn’t be top of mind. Why worry about a future that is almost 4 decades away, when the present is so exciting?

“The pleasure which we are to enjoy ten years hence, interests us so little in comparison with that which we enjoy today” Adam Smith, 1759

The reality is that many people enjoy spending and consuming now rather than wait to spend in the future, which is often very uncertain. Planning and saving for retirement is not any different. This is also confirmed by Smith (1759) who was of the view that “the pleasure which we are to enjoy ten years hence, interests us so little in comparison with that which we enjoy today”. As a result, we spend everything now and fail to plan and save for our retirement. We spend our hard earned money on fancy cars, glamorous outfits, traveling and living lavishly; often forgetting the unknown reality called retirement. We ask ourselves why not live for the now? “Isn’t being young, educated and independent all about this?” we ask… We spend time convincing ourselves that retirement is a far-fetched reality and we have ample time to save for it. This is unfortunately not true!

Researchers are of the view that we need to have saved at least 90% of our monthly income during our retirement if we are to maintain our current standard of living (taking time value of money into consideration). After reading a number of published articles on retirement planning from many researchers, I challenged myself to calculate if I can afford retirement and it actually hit me that I didn’t. I used the retirement tracker tool provided by Old Mutual to determine if I could afford to maintain the lifestyle (social, health & travelling) I am enjoying now many years later during my retirement years.

I proudly entered my current pension contribution, my employer’s contribution and off course the two retirement annuities I have into the retirement tracker tool. I was proud because I took the financial advice from seminars attended previously to proactively save for my retirement through a number of savings initiatives. To my disappointment, with ALL my current saving efforts- pension contributions and retirement annuities, I would have saved ONLY 66% of my current monthly income (taking time value of money into consideration) by retirement, which is not enough to maintain my standard of living.

The retirement tracker tool also calculated how much additional savings I needed if I was to achieve my target of 90% monthly income planned for my retirement. The outcome of this exercise is that I need to increase my retirement savings by M 1,500.00 per month which seems almost impossible! But is it really impossible, if I can afford going out every weekend with friends, to buy shoes, outfits and travel? The biggest challenge for me and many other young professionals is finding the balance between living a full life now and planning for a future that is uncertain- will I live long enough to enjoy my retirement savings?.

The challenge is that if we live fully today and fail to plan and save for tomorrow, we run the risk of facing our retirement years broke because we have inadequate savings. How then do you balance living your best life today, yet planning and saving adequately for the future is my question? Having seen many of our parents approaching their retirement years with inadequate savings; my question to you is our generation prepared to face the same fate our parents are facing? Or are we prepared to make the sacrifice today, give up our present consumption and save for a future we want? My challenge is for you to use the retirement tracker tool and calculate if you can afford your retirement that is 4 decades away. If you cannot afford to maintain the lifestyle you wish to have, what are you prepared to do to achieve that?

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