Why Plan for Retirement?
Planning for Retirement may seem like something you do when you’re close to not being able to work anymore or choosing to not work anymore. However, it is an essential part of any sound financial plan and should be considered from the day you start earning your first dollar. It helps to create financial freedom, financial peace of mind and create generational wealth.
How Do You Plan For Retirement?
One of the first steps in planning for your retirement is to enroll in Pension Plan. A Pension Plan is an arrangement that provides pension benefits to its members or to the beneficiaries of its members. Pension benefits typically include receiving an income when you stop working, whether by choice at a specified age (retirement age) or due to ill-health. There is usually also a benefit available should you die prior to any of these occurrences. A Pension Plan is designed to provide you with income for life at the end of your working years.
Why Should You Enroll in a Pension Plan?
There are several benefits discussed below for enrolling in a Pension Plan now no matter how old you are or how much you’re earning.
1. Tax-Free Investment
One of the primary benefits of enrolling in a Pension Plan in Jamaica is the opportunity to make contributions from your gross income. We can choose to contribute up to 20% of our income prior to any statutory deductions (NHT, Education Tax) and income tax in a Pension Plan. This essentially equates to being able to save almost 30 cents extra on every dollar than if you were to try and invest on your own based on your net salary. For example, saving $10,000.00 instead of $7,000.00. Even if you don’t pay income tax, this means being able to save $10,000.00 instead of $9,500. Every dollar counts when it comes to building a solid financial foundation.
2. Peace of Mind
Knowing you will have an income available when you choose to stop working can help to create peace of mind for your financial future. It reduces some of the financial uncertainties and stress that can arise. Some elderly persons are unable to stop working now because they don’t know how they will survive otherwise. It is better for your money to outlive you than vice versa and starting a retirement fund now increases the possibility of you doing so.
3. Experienced Investment Management
Most persons usually say they’d prefer to be in control and make their own investment decisions, but this can be very time-consuming and very risky. To invest wisely, often requires thorough research and tracking which the average person does not have the knowledge or time for especially when wanting to build wealth in all areas of life. Being a part of a Pension Plan, provides the opportunity for informed investment decisions to be made and it increases the probability of having higher returns.
4. Consistency
Most Pension Plans gives you the option to have the contributions be deducted automatically from your salary or your bank account. Having your contributions automatically deducted from your salary or bank account enables you to be more consistent towards your retirement plan. This will require little to no effort on your part and will create the discipline for you to stick with your goals. Life is unpredictable and more often than not when unexpected expenses arise it is tempting to use funds intended for investment and then never replace it.
5. Additional Compensation
Most companies that offer this benefit often requires a minimum contribution of 5% both for employee and employer (total 10%). However, there are some cases where the employer opts to contribute up to an additional 5% but only if you the member (employee) also contributes this voluntary amount. In these circumstances, it is essentially extra money for the services you provide to your company. It would be prudent to maximize this benefit because every dollar counts in creating financial stability.
There is certainly more information to share on this topic but I hope these few benefits I’ve mentioned here will prompt you to take a deeper look into making this type of investment or to maximize your contributions if you’re already a member of a Pension Plan. If you’re interested in enrolling in a Pension Plan, review the list of registered retirement schemes on the Financial Services Commission’s website and speak to an affiliate representative.