We will all need to retire one day, but that’s all taken care of with a government pension, social security or company retirement plan, right?  Well perhaps not – the world is changing and you need to be prepared.  Read on to find out about the global changes that will impact on your retirement and how you can take charge of your own future.

Retirement is a fact of life.  The day will come when you don’t want to work anymore and will want to do some other things in your life.  The only alternative is working until you either die or are too sick to continue working, and neither is an attractive idea.  Since money accumulates over time, you need to be prepared for retirement now, not try to arrange everything a few months before you finish work.

The idea of pensions is that a person pays an amount (deducted in the form of tax or contributions) and when they retire, the government pays it out as a pension.  Of course, the government is not be be trusted and has not been prudent.  The money contributed has often been spent on other things.

Some companies have their own pensions, but even the largest companies like GM have gone to the wall.  You don’t want to depend on whether your company can stay in business or not when it is your retirement at stake.

In most Western countries, government pensions are like a Ponzi scheme, which relies on more and more people paying in to support those who have gone before.  The money from current taxpayers funds existing pensions (which cost more than those drawing them have paid in taxes).  There is not enough money to pay for pensions for those who are starting work, even though they are paying taxes to support those ahead of them as demographic changes mean that there are fewer workers and more retired persons.  When it comes their turn, there will be nothing.

Governments are attempting to resolve this by raising retirement ages, reducing pension entitlements and telling people to prepare for their own retirements.  They can raise taxes a bit too, but taxes in most countries are as high as they can be.  My expectation is that the retirement age will be increased until it is within a year or two of life expectancy and that benefits will be reduced so that pensioners are well below the poverty line, and that eventually there will be no pension scheme at all.  It’s pretty unfair that young workers pay out a fortune in taxes and will get nothing in return, but that is reality.  We need to face the reality and make plans that depend on us and not other people, particularly when the signs of the collapse of the welfare system are quite clear.

I believe that there is a risk that government will interfere with officially sanctioned retirement plans in order to stave off collapse.  We are seeing that in some countries already.

So, I have painted a realistic but dire picture of what is happening and the forces in play.  What can you do?  Well firstly don’t rely on a pension.  Chances are it will not be around, or will be available only when it is too late to enjoy it, or will have a lot of conditions around it, or will be too small to live on.  Your aim is to retire wealthy, when you want to.

Secondly, contribute to your own retirement fund in your own country, but don’t have it as your only means of support.  Take an active interest in it, don’t just offload it to someone else to manage and forget about it.  Also, you should expect increasing interest in your money from the government as time goes on.  If most people are dependent on the government and crying out for a pension and rioting in the streets and threatening to withdraw votes and a few people have retirement savings, it is quite expedient for the government to offer to “look after” your money.

So my third point is to have a separate retirement fund away from your government.  This may mean based offshore in a more thriving economy, such as in Asia, or it may mean in real estate or some other tax advantaged investment that can pay you an income even if you are not working.  The best option would be an investment that allows you to reduce your current taxable income.

So in summary, don’t expect a lot from the government, even if you are paying a lot of tax.  Try to divert some of your income into your own retirement funds, both locally and overseas, and consider other options that may save on tax and allow you to build up enough wealth to support yourself with the income.

Tags: independence, retirement, subversive, wealth

This entry was posted on Friday, March 12th, 2010 at 3:00 pm and is filed under Daily subversive tips. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.