Tuesday, August 16, 2011

Not all our eggs in one basket

There is actually no easy way to financially prepare for retirement. Greece and Ireland (and to a lesser extent Italy and Spain) have shown that relying on a generous government pension is only as secure as the finances of that government. Worse, you are actually relying on the wise financial decision making of politicians, which is at best tenuous and at worst a pipe dream. The USA has a generous government retirement program called Social Security, where in theory the government takes some of your tax as you work and puts it aside for your retirement. I say in theory as repeated US Administrations of both Republican and Democrat flavours have raided the cookie jar and the program is now substantially, if not entirely, unfunded.

In Australia, at least since Paul Keating was Treasurer, we have a program where the money really is put aside and 'wisely invested' for our retirement. The bulk of that money has been invested in the stock market, which seemed for a long time to be a guaranteed strategy for providing security for retirement. However in the last few years it has not been looking so attractive. Over the last five years the Australian stock market has actually returned zero. Alan Kohler explains:
For the past five years the market has given nothing. After the 20 per cent correction between April 11 and August 8, the ASX 200 accumulation index (capital return plus dividends) has now produced a zero five-year return. (Business Spectator 15/08/11)
Of course the superannuation industry will have taken out quite a bit in fees, so the overall result is that for most people over the last five years their super has earned nothing and is probably now less than what they have contributed. Under grandma's bed is starting to look like a cheap and attractive alternative!
The point is not to give up on super, but to acknowledge that funding 20 or 30 years of non-earning is not an easy process. There are so many variables, not least knowing how long we will actually live.
It is good to do our best to financially prepare for the period in our life, post work. But maybe we should also prepare for the period beyond that. These days the topic of death and the question of the afterlife are rarely discussed. The ultimate spiritual questions have been removed from our public agenda. To prepare for retirement is seen an essential for all – to make our peace with God is considered the weird pursuit of a few.
We are all destined to get old, retire and die, though not necessarily in that order. Our super will either run out before we die or we will run out before our super. Either way a secure eternity, guaranteed by a loving forgiving non-commission taking God, must be our ultimate hope and security.
“Just as man is destined to die once, and after that to face judgment, so Christ was sacrificed once to take away the sins of many people; and he will appear a second time, not to bear sin, but to bring salvation to those who are waiting for him.”  Hebrews 9: 27-28

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