Most presentations on retirement and how much you need to save elicit a series of winces from their audiences. Delegates at this year’s Ready Set Retire conferences, a collaboration between Personal Finance and Alexander Forbes that took place over the past two weeks, gave the audience cause for bit of wincing too.
There was some muttering when Personal Finance’s founding and now semi-retired editor, Bruce Cameron, revealed the lump sums required at retirement to generate certain pension income levels in retirement.
And there were gasps when Anthea Towert, the head of scheme consulting at Alexander Forbes Health, showed the sums that would be required to fund comprehensive health care in retirement.
So it was encouraging to hear one of the speakers giving hope to a delegate who asked for advice during a question time. The 58-year-old confessed to not yet having saved a cent for retirement and being in a panic.
John Anderson, the head of research and product development at Alexander Forbes Financial Services, calmly replied that although there is no easy route out of not having saved for retirement when you are approaching retirement age, there are things you can do. He pointed out that the 58-year-old still had seven years before the typical retirement age of 65.
First of all don’t panic, because you can't make good decisions when you are in a panic, he said. The audience had heard earlier during the conference how your brain shuts down when you are in crisis mode.
Next, he advised, save as much as you can by cutting down on your expenses and getting out of debt now.
Anderson said a 58-year-old who hasn’t saved for retirement won’t be able to draw an extravagant pension, and if you are in this position, you should think holistically about what you want from retirement.
You can be happy with less, but have to start planning now, he said.
Anderson suggested that if you are a late-starter to saving for retirement that you estimate the value you can add after retirement.
“Think about what career am I in now. Is there a future for that or do I need to start reskilling myself for some other career?” he said.
Cameron suggested that late-savers or those who do not have enough saved for retirement consider downsizing their home to release some capital.
But, whatever you do, don’t take silly risks, he said in a reference to many pensioners who have lost money in high-risk investments that promise high returns, but frequently result in losses. The likes of property syndications and foreign exchange trading schemes come to mind.
Another hugely encouraging message at the conference came from Anne Cabot-Alletzhauser, head of the Alexander Forbes Research Institute.
There were more gasps from the audiences in Johannesburg and Durban when Cabot-Alletzhauser bravely admitted that she had saved too little for her own retirement, because she had counted on having other sources of wealth later in life.
The former successful owner of an asset management company, Cabot-Alletzhauser had owned shares in her own business. But in a stroke of bad luck, after her husband’s entrepreneurial ventures ran into financing problems during the global financial crisis, she lost everything, including her home. He had used their assets to see his business through the tough times.
Before he could get things back on track, the stress got to him and he died of a heart attack.
Cabot-Alletzhauser says Alexander Forbes’s funding projections show she can retire now on less than it is costing her to rent a home, or she can work until age 97 to achieve the level of income she requires in retirement.
Cabot-Alletzhauser says people in a financial crisis like hers typically have an emotional conversation rather than an intellectual one, and the conversation involves shame – one of “how can this happen to me?”
And in her case, “I am a financial specialist, how did I ever get here?”
Her decision not to save in a retirement fund and rather to reap the rewards of being a shareholder in her own business was not a bad decision on her part, “but life happens”, she said.
In the process, Cabot-Alletzhauser says she has realised that “financial survival has less to do with your financial knowledge and much more to do with realising our financial embarrassment, our shame, and getting it out of the closet”.
She says the shame associated with that crisis then means that what you tell your financial planner is a very different thing to the truth you are experiencing.
The secret of surviving is being able to adapt, and the good news is that, as humans, we are very good at adapting, Cabot-Alletzhauser says.
In adapting, three things can help you, she says.
First, a positive attitude and being passionate about something. Second, getting enough oxygen to allow your brain to keep functioning optimally as you age. And third is maintaining good social networks.
“Everything that you think is insurmountable, we think can be surmounted,” Cabot-Alletzhauser said, encouraging the audience not to be afraid to address their own financial crises and to talk to someone.
Along the way, being informed about the decisions you will make in retirement can help.
For this reason, starting this week, you will find the first of six reports on the presentations at the Ready Set Retire conferences, and we are hoping they will start your conversation, without shame, above what you can and should do to live your best retirement.