By Sue Couper

Bring your future self into your "now" decisions

White woman and smiles at camera
Sue Couper is the General Manager at LOM Asset Management Ltd in Bermuda.

Retirement might be a long way off for you, or it may be knocking on your door. Either way, your current self and your future self are inseparable. Like any good, lifelong partnership, the way to please the ‘‘current" you and the "future" you is compromise.

The most common thing I've heard after 40 years of speaking with retiring clients is that they wish they would've started saving more and sooner.

More than half (55%) of adults ages 26 to 41 say they spend more time planning for vacations than retirement, according to a recent Personal Capital survey.

Here’s an example of how your retired self can have a voice today: My husband and I allow our retired selves a voice with a $1,000 "now" spend. We ask ourselves, “Will this $1,000 furniture purchase improve our well-being now and in retirement or would investing that money for our retirement serve us better?" One thousand dollars growing at an assumed 6% annual rate would be $1,791 in 10 years, $3,207 in 20 years and $5,743 in 30 years, compared to nothing being available in the future because it’s already been spent.

When a "now and future" choice is being made, sometimes the now wins, sometimes the future and sometimes both. Take a vacation for example; how about going on the trip to keep the "now" you happy but maybe choose a less expensive hotel? You’ll still experience the joy of the destination and you’ve shaved off some money to invest for later. Win-win!

For people who listened to their future self when they were younger and had saved $1,000 per month in the S&P 500 index, as a simple example, they would have accumulated $231,000 if they started 10 years ago, $985,000 if they started 20 years ago and $3.4 million if they started 30 years ago. Turning the volume up so you can hear your retired voice sooner is key.

Because actuarial mortality tables statistically show that the overwhelming majority of us will thankfully make it to retirement, the law of averages has to be the winner in the argument.

And what if you’re thinking, “But I already can’t manage on what I have today?” Then all the more reason to bring your retired self into the equation, because if you are struggling to maintain your lifestyle now it will be even harder when your income drops off further in retirement. Small tweaks to your daily routine have a cumulative compounding effect that can radically improve your retirement.

“I have a work pension, so I’m covered.” Thank goodness for mandatory pensions. Aim to max out your contribution and the benefit of your employer’s matched contribution because their contribution is like free money for your future self.

However, the ex-minister for pensions in the U.K., the Right Honorable Steve Webb, reported the concern recently that defined contribution pension schemes were a “slow motion car crash.” Not because pensions aren’t good – they very much are – but because the levels contributed won’t be enough to satisfy peoples’ retirements.

Assuming you’ve taken advantage of all the matched employer contributions and any tax advantages of pensions in your jurisdiction, additional retirement investing needn’t be locked away purely for retirement. You can have more access, control and flexibility on savings investments over and above your pension scheme.

You can’t physically see your future self simply because you’re already looking through their eyes. To prove that, I’m betting it’s your future self that is noting the importance of this article.

Sue Couper is the General Manager at LOM Asset Management Ltd in Bermuda. Please contact LOM at +1-345 233-0100 or visit www.lom.com for further information.

This article was featured in the November 2022 print edition of Camana Bay Times.

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