Friday, July 22, 2016

Retirement Plans, take 1

Subtitle: The State probably won't be there for you

How do you see your retirement?  Will it be long care free days living in an idyllic location.

It depends to a great extent in which country you have lived, saved and retire in.  This Quartz article refers  For Marcus and Agata this will be Europe.  However whilst not as dire as the prospects for Indians, I have some mildy depressing news.

If you are over 40 I can share you some secrets with you

- If you did not start saving for a Personal (non state Pension) now you are screwed
- If you are relying only on a Government State Pension to support you in your old age, you are screwed
- If you are relying on your offspring to support you, you are screwed  (because right now Millennials can't even afford their own housing, in fact they want you to support them, not the converse)

Government Forces
The problems started when
+ People began to live longer
- Funding for pensions collected via taxes diminshed
- The government spent your pension money on other stuff
- This includes the pensions of the existing population.  This effectively turns your state pension contributions into a Ponzi scheme.  There, I said it.

In the future with more old people, and less taxpayers  (millennials are either not working or barely contributing) the gap gets preposterously wider

Bottom line:  The UK (and other European) Governments will change pension rules so you get less.

And note:  The solution is most definitely not to import unskilled foreigners or encourage a UK youth population explosion hoping to attract more taxes from that demographic.  As already noted this group is a drain rather and has already resulted in the Government extending rather than contracting the retirement age  (NB: Earlier retirement was something we had always been promised by media and Government)

We would advise:  Assume your Government pension pays ZERO when you retire, anything they might actually pay should be considered as a bonus and pocket money at best.

Your Occupational pension , i.e. that from your job of working, is more reliable, though note its payout is linked almost entirely to the current Stock Market indices.

The Solution

- Start saving early, if not until now then start now.
- Housing equity is the most sensible option, because cash deposits don't work in 2016 and stock markets are severely over valued
- Make a plan to downsize before your retirement
- Make your dependents, e.g. children quite aware that you will not be able to fund them.  And further, in fact you'd like them to support you. It's called expectation setting!

 You may end up not even having a house, except one on wheels.

You may need to dispose of your car and consider something more efficient

You may consider disposing of any family heirlooms

 You need to seriously consider a change of lifestyle.  And definitely not spend time in expensive tea rooms.

Yes, downsizing is key.  Very painful, but you should plan not to be a burden to society, the state your friends, or family.