There’s an epidemic poised to take over Jamaica that has the potential to devastate the lives of hundreds of thousands of people, and yet there is very little discussion about it in our country. Our airwaves and newspapers are chock-full of opinions on the latest scandal, yet no time or space is being devoted to this looming disaster.

This tragedy will not present itself in the form of a weather calamity that wreaks havoc on our physical infrastructure, nor will it be a medical emergency involving an infectious disease. However, this coming catastrophe will have the potential to bring financial adversity and deprivation on a scale hitherto unseen in our nation.

My apologies on sounding like an angel of doom, but this impending crisis prompts me to be a little melodramatic in my pronouncements.

I am not talking about past and pending redundancies due to the stringent economic measures that our government has had to take; nor am I commenting about the burgeoning debt burden that’s eroding our ability to create long-lasting wealth.

These issues are some of the reasons that make financial prosperity an elusive dream for our people. However, the situation that disturbs me at this time is the fact that a vast number of Jamaicans are approaching retirement age with insufficient nest egg savings or non-existent financial cushions to carry them through this crucial change of life.

The reality of retirement

With a younger population looking to find a place in a shrinking job market, older employees will have to make way even if they are still capable of contributing to the workforce. The problem is that many persons who have passed the age of 50 have no clue about how they will replace their working income when they have to leave their jobs.

An even more insidious issue is that many pre-retirees have a mistaken belief that their pensions will be sufficient to cover their financial needs until they die. Although published statistics indicate that Jamaica has a modest inflation rate, a trip to the supermarket or the petrol pump tells us a different story. This harsh reality is felt most by retirees and others on fixed incomes.

Gone are the days when older folks could depend on their children and younger relatives to take care of them in their senior years. Thanks to the tight financial situation all around the world, many people in their thirties and forties are still looking to their parents for financial assistance.

Therefore, it’s your duty to make proper provisions to take care of yourself when you retire.

How much will you need to retire?

The good news is that more Jamaican financial institutions are now offering approved pension plans, and the number of persons saving for retirement has been increasing. The bad news is that the amount that most people are able to put aside for the future is woefully inadequate to realistically meet their future spending requirements.

To get a better picture of how much it will really take to retire, go the financial tools section at www.financiallysmart.org and click on the retirement calculators. One tool will help you to work out the lump sum you would need to supply your required retirement income, and the other will help you to calculate the amount you would need to save every month to reach your target.

A word of warning – the results of your retirement calculations could be harmful to your health; so be careful if you suffer from heart problems! You will find that when you factor in the effects of inflation, it will take a huge amount of monthly savings for you to amass enough money to live out your retirement. It may seem discouraging at first, but don’t despair; there are solutions.

Will you be able to retire?

Several years ago, when I ran my figures into this retirement income simulator, it forcefully hit me that at the rate I was going, I was never going to be able to stop working for money. Not having saved before I was 31 years old, I was so far behind in wealth accumulation that I knew I had to do something different if I hoped to retire one day.

Your money mission for this month is to take a reality check of your own retirement position. If you have a retirement scheme at your workplace, ask for a statement that will project what you may be able to withdraw when you retire. However, note that this projection will only be an estimate; changes in interest rates and the organisation’s financial health may lead to a different reality.

If your job doesn’t have a pension plan, then start investing in an individual retirement account at an approved institution. The online retirement income simulator will help you to determine if you will have a shortfall. Even if your nest egg won’t be enough, it’s better to save a little than nothing at all.

Next week we will look at ways to create a realistic retirement plan to cover your savings shortfall.

Copyright © 2012 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, May 3, 2012

Read another article on Retirement Planning:

Your Retirement Years: Will You Be Stressed Out or Stress-free?

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl