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Retirement Planning
Thursday, September 18, 2014 - 06:23
Advance warning

The penny has still not dropped for most middle-aged salary earners that the financial planning challenge they face boils down to timely preparation for 30 years of unemployment.
Savers and investors in mid-life only wake up to the ramifications of longevity trends when the issue is packaged as planning for long-term unemployment, says Lara Warburton, managing director of Imara Asset Management South Africa, a company often consulted by those looking to build a substantial retirement nest-egg.
“Intelligent, highly qualified people in their prime earning years often have difficulty with the concept that they are financially vulnerable,” says Warburton. “Their expertise has always been in demand. They are often top earners and have trouble looking ahead to a time when the big salary cheques will stop.
“They really get a jolt when you explain that a key objective of their investment planning is solid preparation for 30 years of unemployment. In fact, that might be an under-statement. They may face 40 years without a job.”
People with access to good healthcare who adopt a healthy lifestyle are living longer. By last year, says Warburton, people living to 100 or more constituted the fastest growing segment of the UK population. The USA already has more than 70 000 centenarians while Japan has about 30 000.
“In a general way, savers and investors planning for retirement are well aware of longevity trends,” she adds. “But they fail to put this into the context of prudent provision that will last them into their 90s.
“Waking up penniless aged 80-odd is not an enticing prospect. By then you might have been in retirement and without a job for 20 years. You might have another 10 or 15 years to go. Arithmetic like this brings greater purpose to long-term investment planning.”
The good news, according to Warburton, is that time is still on the side of those in middle-age. With 15 or 20 years to retirement, a salary-earner can use time as a risk management tool and make substantial commitments to equities – an asset class that may pose some short-term risks but has the best historical record for substantial gains.
“With investments, ‘risk’ means the risk of permanent financial loss,” she says. “Given long enough in the market, there is very little chance of capital loss as markets rebound in the long run and drive substantial wealth build-up.
“In mid-life you can make bigger commitments to equities than you might feel comfortable with when you are on the verge of retirement. The prospect of time in the market creates the opportunity for substantial gains. If you’re preparing for 30 years without a job, you will certainly need a financial plan with the potential to deliver strong gains over a prolonged period.”
Imara is an independent, Botswana-listed investment banking group. It is a mid-sized company with offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, Sterling Bank in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.
The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities. It provides a range of specialised financial products and services that can be broadly categorised as:
• Asset management (institutional and private client)
• Corporate finance and advisory services
• Securities
• Trust and administration services

Copyright © Insurance Times and Investments® Vol:27.9 1st September, 2014
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