Why your time isn’t free.

A member of the Bank of England monetary policy committee, Gertjan Vliege, has mooted raising the state retirement age to stimulate the economy, citing as justification the fact that traditional policies have little manoeuvre-room since interest rates are already at historic low levels.

This poses the question – are we really worker bees whose job it is to stimulate the economy, as if the economy were a ravening beast that perpetually needs to be fed? And perpetually wants more…?

Yes, I get that it generates wealth which benefits or should benefit all of us but… where is the work life balance here?

Maybe the retirement age will be raised. I hope it is not and I hope that if it were to be raised, it were not done in the way that has impoverished millions of women who saw their threshold rise from 60 to 65 but who had not had adequate time to prepare.
So what can we do about it?

  1. Plan our own self-funded pension. Whether or not our retirement age is raised this will stand us in good stead, especially since many of us will enjoy the high-order problem of increased life expectancy compared to previous generations.
  2. Increase our workplace pension to its maximum levels.
  3. Invest wisely so that we can amass a capital sum which will provide dividend income and/or capital drawdown to feather our older age.

To do either of these latter two things we will need to invest in a more aggressive portfolio than standard retirement planning advocates, which will vary depending on how close to retirement we might be.

What this means is more equities, more alternatives and fewer bonds.

Beware the risks of reckless conservativism a.k.a. going broke slowly where the avoidance of risks associated with equities and alternatives consigns us to a future where our capital sum in cash is eroded by inflation and is in no way protected by the paltry returns on cash.

You can read more about how to invest and the perils of reckless conservativism in my book 10 Things Everyone Needs to Know About Money. [Discover it at bit.ly/10thingsmoney]

Let’s hope retirement age is not raised. Let’s hope we get to choose when we scale back. The more proactive we can be now, the greater will be our freedom of choice. Time isn’t free. To amass the means to pay for it when the time comes, we need to act now.

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