Bring your future-self into your ‘now’ decisions

Retirement might be a long way off for you, or it may be knocking on your door. Either way, your current self and your future self are inseparable; you can’t divorce or sack yourself, you’re together “until death do us part”.

And so, like any good marriage or lifelong partnership, the way to please the ‘‘current” you and the “future” you is to compromise. 

If your future retired self could speak to you today, what would they say?

In my experience, speaking to retiring clients for almost 40 years, the most common thing they say to me about their assets, is “I wish I’d put more in.”

They wish they’d set aside more, saved more sooner, started thinking about their retirement earlier.

More than half (55 per cent) of adults ages 26 to 41 say they spend more time planning for vacations than for their retirement, according to a recent Personal Capital survey of 2,000 US-based adults.

A retiring client, early in my career, said, ‘Why didn’t your investment company ‘make’ me put in more?’

I wanted to say, ‘Because your younger self wouldn’t listen!’

But at retirement, it’s too late.

So, from that day forward I vowed to encourage clients to bring their retired-self into investment meetings with them, so that their future is considered throughout their life. That also means their future-self can then do the nagging and not me.

Is it really possible for your retired self to have a voice today?

Here’s an example of how: my husband and I allow our retired-selves a voice with a $1,000 “now” spend. In other words, we ask ourselves, “Will this $1,000 furniture purchase improve our wellbeing now and in retirement or would $1,000 invested for our retirement serve us better?”

Growing at an assumed 6 per cent annual rate, an invested $1,000 would be $1,791 in 10 years, $3,207 in 20 years and $5,743 in 30 years, compared to nothing being available in the future because it’s already been spent.

A $5,000 “now” spend, or more, means that our retired selves definitely get a say and have some sign off rights!

We are not really talking to imaginary people around the dinner table (not before the rum anyway), but we’re simply committing to spinning the current and the future plates at the same time. It means our whole life journey can be considered.

When an active, “now and future”, conscious choice is being made, sometimes the “now” wins, sometimes the “future”, and sometimes both.

Take a holiday for example. How about going on the trip to keep the “now” you happy (because that’s clearly important too), but maybe choose a less expensive hotel? You’ll still experience the joy of the new destination and you’ve shaved off some money to invest for later. Win-win!

For people who listened to their future self when they were younger and had saved $1,000 per month in the S&P 500 index, as a simple example, they would have accumulated $231,000 if they started 10 years ago, $985,000 if they started 20 years ago and $3.4million if they had been investing $1,000 every month for the past 30 years (through to December 31, 2021).

Turning the volume up so you can hear your retired-voice sooner is the key.

A common resistance to listening to your future voice is your present voice saying, ‘Stuff it (or worse), I could be dead tomorrow. You only live once, right?’

When you consider actuarial mortality tables statistically show that the overwhelming majority of us will thankfully make it to retirement, then the law of averages has to be the winner in the argument. 

We can’t afford to deny our future self because they are us, and we are them. It’s you that you’re looking out for, after all.

The compromise question to keep asking is ‘Will I benefit, or will my retired self benefit?’

Every simple, powerful action now, affects your abundance or otherwise, in the future.

And what if you’re thinking, “But I already can’t manage on what I have today?” Then all the more reason to bring your retired self into the equation, because if you are struggling to maintain your lifestyle now, it will be even harder when your income drops off further in retirement.

Let both your “selves” take a step back, try and review where you can make changes today. It’s not something that needs to drastically change your lifestyle now – small tweaks to your daily routine have a cumulative compounding effect that can radically improve your retirement. Even saving the cost of a cup of coffee each day can make inroads.

You may think you’re covered because of your work pension scheme, and thank goodness for mandatory pensions.

But is it enough?

Aim to max out your contribution and the benefit of your employer matching that, because their input is like free money for your future self.

However, Britain’s former minister for pensions Steve Webb, noted recently that defined contribution pension schemes are a “slow-motion car crash.” Not because pensions aren’t good – they very much are – but because the levels contributed will not be enough to satisfy people’s retirements. Thus we are running blind into a future problem.

A rough rule of thumb for retirement provision is to set aside half your age as a percentage of your salary.

So, if you’re 20 then 10% of salary, 30 then 15%, 44 then 22% and so on. 

Assuming you’ve taken advantage of all the matched employer contributions and any tax advantages of pensions in your jurisdiction, then additional investing needn’t be locked away purely for retirement.

You can have more access, control and flexibility on savings investments over and above your pension scheme.

This means you can be encouraged to squirrel away as much as possible for your retirement through regular savings or lump sums when you have a bonus, knowing that it’s accessible should a life-shock unfortunately occur; such as redundancy, illness, written off car, new boiler – you know them. That’s when the “current” and the “future” you can re-group and re-prioritize funds as necessary.

You cannot physically see your future self simply because you’re already looking through their eyes. To prove that, I’m betting it’s your future self that is noting the importance of this article.

Having an investment advisor to help you determine “how much is enough” is critical and the positive saving and investment decisions you make today will put a smile on the face of your future.

The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.