At what age do you plan to re­tire? Many will not have a choice as they may be faced with a manda­to­ry re­tire­ment age. That age usu­al­ly ranges from age 60 to 65. There are oth­ers who may have greater choice, but may even­tu­al­ly be forced in­to re­tire­ment through ill-health and this is par­tic­u­lar­ly ap­plic­a­ble to self-em­ployed per­sons and those in­volved in man­u­al labour type of ac­tiv­i­ties. So what about af­ter you re­tire? With ad­vances in med­ical care it is quite pos­si­ble and, in fact, very prob­a­ble for the a per­son cur­rent­ly aged 30 to 40 years old to live well in­to their 70s, 80s and even 90s.

That could eas­i­ly mean ten, 15 even 20 years of post-re­tire­ment life. So how are you go­ing to fund those re­tire­ment years and where are those funds go­ing to come from? A study con­duct­ed by the Amer­i­can Ben­e­fit Re­search In­sti­tute sug­gests that the av­er­age Amer­i­can would have to work in­to their 70s and even 80s in or­der to af­ford re­tire­ment. This is be­cause, first of all, they have not set aside suf­fi­cient funds for re­tire­ment and, sec­ond­ly, the costs for some of the ba­sics of life- food, trans­port and med­ical care-have been in­creas­ing rapid­ly and will con­tin­ue to do so and in the process out­pace the rate at which their re­tire­ment funds are grow­ing.

The T&T ex­pe­ri­ence

The ex­pe­ri­ence in T&T is like­ly to be the same. For one, it is im­prac­ti­cal to re­ly on the State to sup­port your re­tire­ment lifestyle. And there are a num­ber of is­sues that the av­er­age 30 to 45 year old is not tak­ing in­to con­sid­er­a­tion. Con­sid­er that peo­ple are tend­ing to get mar­ried lat­er in life and have less chil­dren that the ear­li­er gen­er­a­tion. Al­so, prop­er­ty prices have sky­rock­et­ed over the past ten years as has the rate of in­fla­tion. The im­pli­ca­tion is that peo­ple are tak­ing on larg­er debts-mort­gages-lat­er in life. In­fla­tion is al­so re­duc­ing the lev­el of dis­pos­able in­come. Fur­ther, few­er chil­dren mean that as par­ents, there are few­er po­ten­tial can­di­dates to lend fi­nan­cial or oth­er types of sup­port in your lat­er years.

Lim­it­ed op­tions

I have stat­ed this many times be­fore, but it bears re­peat­ing. You re­al­ly have three op­tions open to you when it comes to plan­ning for re­tire­ment. Ei­ther save more, in­vest more ag­gres­sive­ly or be pre­pared to work longer. If you think about it, fac­tors such as the job mar­ket, the lev­el of in­fla­tion and your cur­rent lev­el of debt will cre­ate chal­lenges to your abil­i­ty to save more. Your abil­i­ty to work longer is al­so a func­tion of your em­ploy­a­bil­i­ty at that age and your health. The lat­ter is some­thing that can present un­fore­seen chal­lenges as the cost of treat­ing with med­ical chal­lenges can not on­ly pre­vent you from work­ing, but al­so quick­ly erode the sav­ings that you have ac­cu­mu­lat­ed.

If you ac­cept the chal­lenges as­so­ci­at­ed with sav­ing more and work­ing well in­to what would have pre­vi­ous­ly been your re­tire­ment years, then ap­pre­ci­ate that the next op­tion is to take a care­ful look at how you in­vest. Over the past few years, we have seen in­vest­ing take on two broad ap­proach­es. First, there was the chase for high re­turns, which car­ried the per­cep­tion of no risk that have re­sult­ed in al­most to­tal im­pair­ment of the in­vest­ed funds. This has since mor­phed in­to an in­vestor that "does not like the two per cent re­turn, but does not want to take any ad­di­tion­al risk."

Greed, fear

The over­all con­clu­sion is that most peo­ple sim­ply do not know how to in­vest and ap­proach the sub­ject from ex­tremes based on greed and fear. The end re­sult is usu­al­ly fail­ure to achieve their in­vest­ment goals. Then, rather than blame their in­abil­i­ty to take a sound, struc­tured ap­proach to the is­sue and seek out a com­pe­tent and ex­pe­ri­enced in­vest­ment ad­vis­er, they will in­stead con­clude that "this is not for me." By do­ing so, you are im­plic­it­ly mak­ing the de­ci­sion that you will be work­ing well past age 60 or that you will be faced with a re­tire­ment lifestyle that is sig­nif­i­cant­ly be­low what you cur­rent­ly en­joy. Have you ever won­dered why so many peo­ple aged 50 and above get caught in fi­nan­cial schemes? The an­swer is that at this age, many are faced with the pan­icked re­al­i­sa­tion that time has run out and so opt for the most at­trac­tive "get rich scheme" on of­fer.

Strate­gic ap­proach

There is a fun­da­men­tal point to ap­pre­ci­ate and that is that at every mo­ment, in every stage there is an in­vest­ment strat­e­gy that can as­sist you in achiev­ing your fi­nan­cial ob­jec­tives. Con­sid­er the cur­rent sce­nario where most in­come funds are quot­ing rates in the re­gion of two per cent. Rates have been low for the past cou­ple years and may re­main so for some time in the fu­ture. If you sim­ply re­main fear­ful and stay in near-cash in­vest­ments for a pe­ri­od of, say, two to three years, how will that im­pact your abil­i­ty achieve the sums you need to re­tire com­fort­ably?

Many peo­ple have no clue as to how to an­swer that ques­tion. It could very well be that ac­cept­ing a two per cent re­turn over two to three years is a very high risk strat­e­gy in terms of achiev­ing your re­tire­ment goals. It is im­por­tant to put your in­vest­ments and the re­turns on those in­vest­ments in­to the con­text of what you are seek­ing to achieve and ad­just your strat­e­gy in or­der to en­sure that you stay on track. Let me use last week's ar­ti­cle to high­light this point. For those who do not re­call, last week I warned about the num­ber of Chi­nese stocks that have been ac­cused of fraud­u­lent re­port­ing to share­hold­ers, re­sult­ing in the prices of these stocks go­ing in­to free fall. Some have even been sus­pend­ed or delist­ed.

Lever­age for sig­nif­i­cant gain

In­vest­ing in the emerg­ing mar­kets, es­pe­cial­ly Chi­na, has been a big theme over the past few years as Chi­na is on course to be­come the world's largest econ­o­my in the next ten to 20 years. Clear­ly, there are op­por­tu­ni­ties there that in­vestors can lever­age for sig­nif­i­cant gain. So now that you are aware there are a num­ber of Chi­nese stocks that are not what they seem, what do you do? The choic­es are stay the course re­gard­less of the risk, some­thing which most may not have the stom­ach for, or get out al­to­geth­er and go back to the two per cent re­turn. These two choic­es high­light the ex­tremes of greed and fear and nei­ther makes much sense if your ob­jec­tive is to se­cure your re­tire­ment.

A far bet­ter ap­proach would be to seek out av­enues that can pro­vide you with the ex­po­sure to the growth mar­kets you de­sire so that you are still po­si­tioned to achieve the req­ui­site in­vest­ment re­turns while, at the same time, man­ag­ing the risks of in­vest­ing in those mar­kets. If you seek such an ap­proach, con­sid­ered to be the mid­dle ground, you will, pro­vid­ed you are prop­er­ly ad­vised, find a strat­e­gy that can work. For ex­am­ple, you should ap­pre­ci­ate that Chi­nese com­pa­nies are not the on­ly en­ti­ties that are do­ing good busi­ness in Chi­na. Just re­cent­ly, Ap­ple in­di­cat­ed that they gen­er­at­ed rev­enues of close to US$5 bil­lion from Chi­na with iPhone sales growth at around 250 per cent. Yum Brands, which owns the KFC and Piz­za Hut fran­chise, was the first for­eign fast food en­ti­ty to en­ter Chi­na and has been able to pen­e­trate and grow its mar­ket share sig­nif­i­cant­ly over the past decade. In­vest­ing in Ya­hoo will give you ac­cess to some of the best Chi­nese In­ter­net com­pa­nies. I can go on.

Ap­pre­ci­ate that the com­pa­nies list­ed above are not rec­om­men­da­tions. Rather they rep­re­sent ex­am­ples of West­ern firms that are tak­ing ad­van­tage of growth op­por­tu­ni­ties in Chi­na and for that mat­ter the emerg­ing mar­kets as a whole. The point is that rather than tak­ing the risk of in­vest­ing in a Chi­nese stock where the ac­count­ing, reg­u­la­tion, re­port­ing and even man­age­ment may not be up to the stan­dard, that risk can be bet­ter man­aged by seek­ing out US multi­na­tion­als that are grow­ing rapid­ly in Chi­na and oth­er emerg­ing mar­kets. At the end of the day, it is not a case of all or noth­ing, high risk or no risk, but rather seek­ing out ways that you can achieve your in­vest­ment ob­jec­tives in a man­ner that ef­fec­tive­ly man­ages the risk that you face. Recog­nise that over time, strate­gies change and what works to­day may not be as good or even rel­e­vant in a dif­fer­ent in­vest­ing en­vi­ron­ment. It all comes back to you tak­ing the time and mak­ing the ef­fort to recog­nise what is re­quired and then stay the course the achieve your stat­ed in­vest­ment ob­jec­tive. The al­ter­na­tive is work­ing long past age 60.

Ian Nar­ine is a bro­ker

reg­is­tered with the SEC.