Now, more than ever, it’s important to encourage Barbadians to establish and maintain the habit of putting money aside today for their future selves.Otherwise, the consequences can harm both individuals and the country, especially in the context of prevailing questions over our social security system.

The reality is that many Barbadians find it hard to put aside money for long-term pension savings. This can be linked not only to the rising cost of living but also changes in tax incentives, such as the removal of personal tax allowances for contributions to Registered Retirement Savings Plans (RRSPs) and group pensions since Income Tax Year 2015.

This policy shift has reduced motivation to invest for retirement, at a time when Barbadians would benefit from a framework that encourages regular and ongoing saving for retirement.

The Barbados Dilemma

As a country that has always punched above its weight, Barbados was well-positioned alongside those in the region and internationally with a regime that was supportive of personal retirement savings plans. Tax incentives to invest in pensions are a global standard providing several ways for investors to access tax-advantaged accounts to secure retirement funding for their future.

It may be worth assessing how our regulatory environment can continue to encourage retirement planning, especially when the potential risks of insufficient personal savings are significant. Creating incentives that make investing for the future attractive remains a crucial goal.

Not the Time to Throw Our Hands up in the Air

Still, we’re not to throw our hands up in the air. There are several things Barbadians can do.

First, let’s look at the equation for saving for retirement. It is a simple one: We have savings, we add returns on those savings and you get a benefit. To drill down further, we should aim to put aside between 10% to 20% of our income or salary every month in an instrument generating a return of between 4.5% and 7%.  Remember, savings + returns = benefit, with time and compound interest a necessary part of the process.

Second, we must always keep sight of that version of ourselves, standing off in the future, waiting patiently at retirement, trying not to become disappointed at the mistakes we’ve made along the way. We should endeavour to make our future selves happy with what we’re doing day-to-day, in the here and now.

And that means saving, and investing those savings for retirement. Investment instruments include mutual funds, which pool monies from individuals and companies, to invest in stocks (equities), bonds (fixed income), real estate and other securities. Owning a business is another option and a great way to put your capital to work. There’s also investment in real estate.

What should we avoid? Cryptocurrency, because we can’t say with certainty that it’s a safe place to invest. Also, we should exercise wisdom and avoid Ponzi and pyramid schemes. As the adage goes, if it sounds too good to be true, it probably is.

Investment calculators are useful tools that can help to project potential investment returns, and knowing what that converts to as a pension is where an annuity comes in.  

Small, Meaningful Changes

Despite the plethora of information available today, it does not appear to be easier to find the right kind of information. Some investment information on social media, for example, is not as helpful as first appears. That’s where Fortress Fund Managers comes in. Individuals also have a role to play by seeking useful, reputable advice. Despite the deluge of questionable resources available, there are, and I often recommend, such gems as ‘The Wealthy Gardener’ by John Soforic as a place to start sculpting the right approach.

My final word? Individuals should focus on what actions they can take now. First, whatever income we have that we wouldn’t miss, put that aside. In other words, we should think about the things we don’t need to do or buy and start there. Then, over time, we should become more deliberate and try to live on less of what we earn and save a bit more than what we would miss. These are small, meaningful changes that we can make if we’re spending more than we need to. That’s a baseline of where to start. And then we should educate ourselves as to what vehicles are available in which to put our money.

Disciplined Approach to Investing

Fortress has a knowledgeable team - the core of our offering. We have people who are very disciplined about our approach to investing and therefore, we’re a great home for those saving for a long-term goal like retirement. We offer both fixed income and equity investments in Barbados and U.S. dollars, which suit varying levels of risk tolerance. Regardless, we keep our eye on the ball and make sure we invest in quality companies at fair prices.

Read more about Fortress Fund Managers