Tuesday, 2 July 2013

How Will I Ever Afford Retirement?

'Frugaldom' Could be the Answer.

Frugally philosophical thoughts about how to avoid abject poverty in the event that the State Pension collapses and we're left without an income.

 

Part 1

 
Continuing with my musings on the topic of retirement income, I was told not to take this lying down... so I lay down to contemplate the future!
 
We learn all the best lessons the hard way, I think, but I'm not entirely sure why that is. I suspect it's because we're usually too impatient and want to get on and enjoy ourselves without waiting to study the more intricate details - a bit like putting together a new DIY project without reading the instructions or, as we all know to our detriment, signing some agreement without reading the small print. We want the feel good factor and we want it now!
 
As previously mentioned, I got my tax return done for another year and I'm as poor as I thought I was. On the plus side, I have apparently paid enough qualifying years of National Insurance to entitle me to the full basic State Pension of £110.15 a week, but I need to wait until the end of 2030 before I can claim that! That's only another 17 years to wait and find out if the Government can actually still afford to pay me a State Pension!
 
My calculations are basic, to say the least; based on my current lifestyle and increasing it in line with 2.5% inflation (a conservative guesstimate), my £4,000 per annum becomes over £6,000 - things could cost over 50% more by the time I retire and could be double their current prices by the time I reach 85! (I may not, in which case I'll need to hope that the tiny life assurance policy is sufficient to cover funeral expenses - happy, am I to be dwelling on such thoughts!)
 
So, back to the lying down thinking of this long-term possible predicament, where and how best could a frugal living person such as me invest my paltry savings? The volatility of the stock market worries me, the potential for the collapse of the banking industry is a real possibility and keeping cash 'handy' isn't an option if there's potential for the Government to completely change (or even abolish) hard cash. Future fantasy it may seem, but the ring of truth cannot be ignored.
 
What do we NEED?
 
Food & water
Clothing
Shelter 
Energy
Good health
Fitness
 
What do we WANT?
 
Comfort
Enjoyment
Relaxation
Stress-free living
 
As frugal investors, we need to look back and see what progress has been made over the last 50 years in order to be able to grasp the possibilities for the next 50. The old quote about man living for three score years and ten is now outdated - some haven't even given up fulltime work by that age now and could still have about 30 years to go; that's like another lifetime for some reading this!
 
Nuclear powered electricity for homes first came to the fore in 1951 but let's skip forward to the 70's, because I know many of us were around then. Looking back over this relatively short period of time, we see the following inventions developed and brought to the mass market:
 
Pocket calculators
Videos
Compact Discs (CDs)
Satellite broadcasting
Car phones and mobile phones
Computers
Mass produced electronics
Microchip technology
Games consoles
World Wide Web
High speed Internet access
Cloning & Genetic Modification
 
The list is endless, but even the most frugal of us have experience of at least one of the above and we no longer consider things like digital communications or genetically modified foods as anything special. (I use the 'genetic modification' term broadly.) We have power at the touch of a button, can speak to people practically anywhere in the world and can do most things at whatever time of day or night we want. We can go virtually anywhere in the world, we can travel further and faster than ever before and we can even go to the edge of space and leap to earth in safety - how fantastic does all of that sound when we look back over history? How crazy is it that I can sit here right now and key in a few letters on a keyboard and see the Sphinx and Great Pyramids in aerial view or travel along YOUR street, looking at your neighbourhood? It's phenomenal! We have witnessed a whole new world develop before our very eyes and, with every new day that arrives, we see the beginnings of the next new world unfolding.
 
Stay 'with it', because history has a habit of repeating itself. It may not be an identical tragedy, the exact same virus or a similar weather phenomenon, but nature rules supreme and we can never know what's around the next corner. We COULD soon reach a stage where our elderly residents are reaching the age of 150!
 
Oh my, I have wandered completely off course again and need to get back on track - we're supposed to be solving the problem of affording our retirement, not wondering what life could be like at 150...

I need coffee!

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