INFLATION
According to investopedia, it stated
that “Inflation is defined as a sustained increase in the general level of
prices for goods and services. It is measured as an annual percentage increase.
As inflation rises, every dollar you own buys a smaller percentage of a good or
service”. While Wikipedia noted that “In
economics, inflation
is a sustained increase in the general price level of goods and services in an
economy over a period of time.”
And according to Wikipedia,
Nigeria’s inflation rate stood at 8.3 percent as at July 2014 and as at
December 2014 stood at 9.2 percent according to Trading Economics, the country of
Venezuela has the highest inflationary rate of 60.9 percent as at May 2014
while Italy has the lowest inflationary rate of -0.9 percent as at July 2014
according to Wikipedia.
But according to Michelle
McGagh of citywire.com
she observed that “Pension savers are still in the dark about the impact the
‘inflation switch’ brought in by the government two years ago will have, despite
the possibility that it could wipe 25% off their retirement income.” They went
on to say that “Research by human resources business, Aon Hewitt shows Brits do
not understand what effect the switch from the retail price index (RPI) to the
consumer price index (CPI) has had” .The article went on to say that “Two years ago, the government announced plans to move the indexation of pensions from RPI to CPI. It did this because CPI rises a lot slower than RPI, as the latter includes housing costs, so it means the state pension will rise more slowly, as will public sector pensions, costing the government less money. When it comes to private pensions, the amount they pay out could also increase more slowly as many are tied to inflation, and would have adopted CPI instead of RPI.”
Although the article based their research on the situations in Britain, but the aftermath of globalization does indicate economy does not exist in isolation stressing that what affects one economy will definitely affects the other. And according to Nathalie BonneyHow rising inflation can destroy your pension” which appeared in money observer, the article noted that “Anyone who has bought a fixed annuity [which provides a regular income for life] could see the value of their pension erode significantly over time,' says Dr Ros Altmann, director general of Saga.
She adds: 'The longer they live, the poorer these pensioners become, as the real value of their fixed pensions is reduced by inflation.'So how does inflation affects your pension pot? Nathalie noted that “Any cash savings are hit because the low interest returns on savings accounts cannot compete with the rate of inflation. Pension pots face a similar challenge with money losing value over long timescales”
If inflations are hitting Europeans and American who at times have negative inflationary rate what happens to Africans with one or two digits inflationary rate.
What it portends is that your pension pot may not carry you through during retirement. This is because during period of inflation, what N100, 000 can buy in previous years may not purchase up to N 75,000 during period of inflation. How then do you protect your pension pot during inflation? You may have nothing or less to do to protect your pension pot during inflationary period. But the decision you take in either choosing programme withdrawal or annuity will offer the necessary succor. Because those who are more likely to be hit by inflation are those on annuity as they have a regular income without investment, as the investment that comes into their pension ; go to the pool of fund and not the annuitant; although they may continue to receive pension throughout their life time, but the value over time may be eroded by inflation.
What happens then, when the situation described above hit the retirees, coupled with the delicate health nature of men and women above 65 years? Will it shorten their lifespan? Will it impact negatively on them? Definitely yes, but the survival of the individuals involved is a function of their ability to absorb situations and their mindset, for those who have positive outlook; it will definitely not affect them.
Fraud
Avoid
financial scam According Sheiresa
Ngo of the wall street journal , she noted that “Unfortunately, seniors
are often the targets of financial scams. The FTC recently refunded more
than $2.4 million to investors who were tricked out of millions of dollars
in a precious metals scheme. The FTC says many of the victims were senior
citizens”
Schuller (1988:112) noted that success without
social respect can be an ultimate and dismal failure.
Old age has one problem according to psychologist,
it tend to make old people vulnerable to issues of money making, as they have
dream idea of trying to achieve what they fail to achieve during their working
career. They now want to achieve it
during old age and by so doing enter into one wrong investment decision
or the other.
Whatever they have not achieve they tend to believe
that retirement fund will afford them that opportunity, by so doing they enter
into wrong hands who will fleece them of their hard earned money. The result is
that most of the retirees return back to work in order to survive and enjoy
their old age. But what these scammers do not know is that wealth do not bring
happiness as it is stated in Ecclesiastics 5 verse 10-11 “ How absurd to think
that wealth brings happiness, the more you have, the more people come to help you
spend it and continuing in Ecclesiastics 5 verse 12, 14, it sates “
But the rich are always worrying and
seldom get a good night sleep” Riches are sometimes hoarded to the harm of the
saver, or they are put into risky investment that turn sour and everything is
lost”
And continuing in Ecclesiastics 5 verse 19 and 20,
“And it is good thing to receive wealth from God and the good health to enjoy
it” “To enjoy your work and accept your lot in life- that is indeed a gift from
God, people who did this rarely look with sorrow on the past, for God has given
them reason for joy”.
And so in making wealth, it is pertinent for us to
have that God given joy that gives one happiness-
a lasting happiness.
Anything short of that may not augur well
especially for con artist as Robert Kiyosaki in his book Rich dad Poor dad,
noted that there are so many ways, one can be rich, and he included the
following, through inheritance, playing lottery, investing or by being a crook
or an outlaw but there is a price, you risk going to jail. Kiyosaki (1995:351) continuing he stated that ‘A great
story must interest , excite and cause people to look into the future and dream
a little, there should also be integrity behind the story, because our jails
are filled with great story tellers without integrity”.
Health
The desire of every pensioner is to take care of
his or herself during old age, but is it
the retiree financially stable to
shoulder such responsibility , bearing in mind that the period 60 and above
comes with various lingering issues including medical health problem.
The medical and health challenge is of varying
dimensions, high blood pressure, stroke, obesity, heart attack, cancer of the
breast, prostate cancer that and other
medical issues comes with old age.
With the developing state and coupled with the
inability of the African governments to have a viable medical programme for old
people as prevalent in other continents like Europe, North and South America,
Asia , Australia etc. Africa countries with the exception of few African
countries like South Africa, Egypt etc have not been able to develop a medical
programme for old people and senior citizen. Even where it is said to be
existing, there are bottlenecks, corruption and other vices militating against
it.
So what do they do in such economy where there are
little on non existing medical program for old people, what will the old people
do in such a situation, will they resort to the little or no contribution of their pension pot.
Investment
decision Tom Macphail in 10 costly Pension Mistakes noted
that “If you have a pension, have you ever reviewed it? Millions of people
haven't. Moreover, recent research revealed more than two in five adults (41%)
- 8 million people - cannot remember how their pensions are invested. Why is
that alarming? Performance can vary quite dramatically across investments and
even a seemingly small difference could have a significant impact on the size
of your pot” Continuing he stated that these are just projections. Investments
will not always go up in value, they also go down, so you could get back less
than you invested; what is certain is that they won't perform as predicted.
Also, these values are in today's terms, without considering inflation, which
will reduce the spending power of your money over time “According to several
researches, people invest for two basic reasons; they are follows, to make
provision for old age and to be wealthy. Being wealthy is a function of the
state of mind of the owner and the generosity of the individual.
So many people cling to their money as if their
life depends on it. While some are willing to give almost half of their
possessions but that is not our subject of discussion.
Venita Van Caspel according to schuller noted while studying investment “heard a very
startling statistics of every people reaching age 65, only 2 percent were
financially independent” continuing
Schuller op cited opined that Venita was raised in a Christian home
without money, which she claims gave a health respect for a dollar.
From the startling revelation, it all means that
many are bound to fail should they kept deaf ear to investment.
What the article is saying is that apart from your
pension contribution, you can also embark on one or two investment instruments
to protect your age.
And in embarking on investment, it is wise to
consult the professionals in that field, these investment advisers, analyst is
able to study trends and be able to make informed decisions to that effect.
