George Foreman, former boxing champion, once made a famous statement: “It’s not at
what age I want to reƟre but at what income”. Indeed, this statement sums it all with
regards to the challenge thatmost of us will have to face at some point inƟme. ReƟrement
is something that most people tend to associate with old age or start to consider making
provisions for it when it is usually too late. Indeed, for someone to maintain the same
pre-reƟrement standard of living aŌer he/she stops working, he/she will have to derive
an income stream that is not too far away from what he/she is used to live on.
Studies conducted by the Centre for ReƟrement Research at Boston College (US) tell us
that the number of people at risk of being unable to maintain their standard of living has
increased dramaƟcally during the years. Indeed, for people who were born in the period
1946-1954, this risk stands at 35% while for those born during the period 1955-1964,
the risk is 44%. For the younger generaƟon, i.e. those born aŌer 1965, the risk is even
higher at 49%. This implies that 1 out 2 persons of the current generaƟon runs the risk
of having to cut down on his/her level of comfort because of lower revenues during his/
her reƟrement phase.
Historically, people in many parts of the world have been relying heavily on social security
benefits at reƟrement. However, in recent years, governments in many countries have
been downsizing the benefits associated to welfare state programs due to budgetary
constraints. As a result, we are leŌ with no choice but to look aŌer our own reƟrement.
Healthier lifestyles and scienƟfic advances have increased life expectancy throughout the
years; the average global life expectancy has jumped from 53.7 in 1960 compared to 70.6
in 2012. The length of reƟrement is increasing as life expectancy conƟnues to rise.
InflaƟon is another challenge that many pensioners have to bear. We all know that
inflaƟon eats up our buying power over Ɵme. Developed countries have an average
annual inflaƟon rate of 2%, whilst in emerging economies, the average stands in the
INTERVIEW
Swadicq Nuthay, Chief ExecuƟve of AfrAsia Capital Management: Not thinking about reƟrement?
Swadicq Nuthay, Chief ExecuƟve of AfrAsia
Capital Management
13
range of 5-7%. Thus, there is a gradual but steady erosion of
purchasing power as the years go by. Besides, there are also
the rising costs of healthcare, ranging from hospital/private
clinics for treatment and health maintenance to medicaƟon
and drugs, as well as auxiliary assistance such as wheelchairs,
etc. Recent studies have shown that this cost has doubled
over the last 25 years.
Another issue that has changed the reƟrement landscape
over the years is the shiŌ away from defined benefit pension
scheme towards defined contribuƟon. With defined benefit
pension plan, employees are in a posiƟon to know the
income they will expect at reƟrement, which is a percentage
of the last salary for example. On the other hand, with a
defined contribuƟon scheme, the expected income that an
employee can expect to receive will depend on both the level
of contribuƟon in the fund during his/her working phase and
the investment return generated by the scheme. Hence, this
is another element of uncertainty that employees will have
to gauge while planning for his/her reƟrement!
Inviewof theabove,whataretheexpert’s recommendaƟons?
Does this mean that if you diligently put aside, say, 9% of
your salary each month for 30 years, you can rest assured
that you are not at risk? The answer is NO. It all depends on
how and where you are invesƟng your savings.
The tradiƟonal theory of lifestyle invesƟng tells us that each
individual experiences various lifestyle stages, in which the
investmentneedsaredifferent.First,thereistheaccumulaƟon
phase, when the individual is able to invest in relaƟvely higher
risk assets and follow an aggressive investment strategy,
designed to achieve maximum longer term growth. Second,
comes the consolidaƟon phase, whereby the individual has
more resources to devote to investment, but may want to
take a less risky approach. The third phase is the spending
phase during which the individual is no longer working and
is living on the income and capital accumulated in the first
two phases.
So, in line with the above theory of lifestyle, investments
change accordingly, ranging froma rather aggressive strategy
(whereby a major part of your porƞolio is vested into
equiƟes with more risk and higher return expectaƟon) when
an individual is relaƟvely young, to a more conservaƟve one
(whereby the porƞolio is mostly geared towards lower risk
fixed-income instruments) as and when he/she grows old.
AŌer reƟrement, investments in ventures with very low risk
and stable returns should be favoured.
Therefore, it does not suffice to save and invest. InvesƟng
wisely is amust. And for that, seeking theadviceof investment
professionals to beƩer plan your reƟrement is crucial.
Investment professionals are well-equipped to manage your
investments andare inabeƩer posiƟon to look for investment
opportuniƟes and adapt quickly to market posiƟons, whilst
constantly monitoring for your needs as and when you pass
through significant age brackets. Only then can you look
forward to a ‘gold-nest’ reƟrement lifestyle in the sun, by
the pool, with your shiny dentures in a tasty cocktail glass.
It’s not at what age I want to reƟre but
at what income
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