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Well, anybody under 40 probably just took offence at my title because they don’t know who the A-Team is… and I blame them because they don’t know that awesome 80’s series. For the uninitiated, it was a kick-ass action series in the
Today, still wanted by the government, they survive as soldiers of fortune. If you have a
That was a while ago. I wonder if the characters in A-Team actually saved up enough for retirement or ended up being greeters in Walmart? Obviously they didn’t have government pensions because the government didn’t like them.
Joking aside, an important part of
Acquiring this money can be challenging if you don’t have a private employer pension (which is increasingly the case). Saving and growing your money is a marathon-like goal as it involves effective goal planning, discipline and emotional management (as I mentioned before a key component of pursuing goals is managing and harnessing emotions). It is one of the ultimate products of a life of financial decisions.
The topic of retirement and retirement savings often creates a sense of quiet panic and stress as it is daunting to many people. They seem kind of worrying but far away. And overwhelming. And something we all should probably take action on… but…. end up postponing.
What’s worse is that we often are told it’s something we should start preparing ideally for in the early years of our life when sadly we often lack the foresight, knowledge and maturity to start (I sure did!).
As in many long-term goals, there is a lot of uncertainty. There are risks of market loss or investment mismanagement regardless of whether your retirement savings are being managed by the government, your employer or yourself. Even very big company’s pensions like Sears have been under threat.
Research and surveys suggest that many of us aren’t adequately preparing for retirement. Contributing factors are flat wages and escalating living expenses and a society that is intentionally constructed to weaken our impluse control and coax us into spending ourselves into debt – it’s not surprising that a lot of people aren’t prepared, don’t know how to and are scared.
And finally, I think that most retirement planning ignores an important dimensions of finance – environment risk management.
I started this blog to provide information for people to improve their future and an important part of that aspect is money. However, I also wanted to raise more awarness about how the risk long-term environmental issues (such as plastic pollution, climate change, biodiversity decline) pose for personal finance.
I see little discussion of the environmental risks factors in the personal finance media I consume and I think this is a significant blind spot. For instance, if you own real estate property, it is important to know not just future economic and population trends of your neighbourhood (conventional risks) but also the projected future water use and water supply (environmental risk).
In this vein, I believe that a key part of retirement plan is a climate change risk plan. This may sound novel, but there are a lot of parallels between conventional retirement planning and creating a climate risk plan.
A person ill-prepared for retirement is an apt metaphor for the current climate change quandary we find ourselves in. For decades now, we have been urged to take action, but we have failed to take meaningful action. And all this time the challenge has just grown and become more daunting.
Am I talking about real estate? Am I talking about climate change? Could be either?
In my opinion, minimizing climate risks, maximizing climate adaptation and successfully retiring are very similar challenges, and require a common outlook and mindset. In some cases, minimize climate risks may involve researching new things and adding extra action items. In other cases, it just means doing the traditional retirement tasks becomes even more critical.
A common challenge in both retirement planning and a climate risk plan is deferred gratification and taking action long before the long-term, inexorable threat
Okay can you give me some actual concrete action?
Yes, this discussion may be a bit abstract so here is the goal. When you retire either because of choice or health or other reasons, you want to be assured you have enough money to live on.
Some common conventional risks are:
- not accruing enough money – people often fail to save and invest enough
money - failing to plan for risk and diversifying properly – as one gets closer to retirements, investments should become more conservative through an updated portfolio allocation since there is less time to make up for volatile market drops
Climate-change risks to retirement could be:
- Utility fees rise and blow out your retirement budget – climate change is forecasted to lead water shortages in unexpected places like Western Canada increasing water costs.
- Unexpected government services cut back and/or increased taxes – the cost of climate change adaptation such as infrastructure strengthening and replacement will create pressure on government budgets. G
overnments may respond by cutting services and/or increasing taxes.
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In both these conventional and climate-change risks the key is identifying these risks ahead of time and then creating a plan (e.g. savings more money, moving to a region with less stressed water sources). In some cases, climate-change risks increase the urgency of taking actions that conventional retirement already requires like minimizing and removing debt. Not only does debt drain savings, but it can constrain you in your current situation – for example, if you have a heavy house debt load it may be difficult to move to a different region, change jobs, etc.
The end game is the same when it comes to retirement planning and climate-change risk planning – with careful planning and foresight, you want to avoid difficult unexpected costs that jeopardize your retirement lifestyle.
In fact, as I have argued before, it’s sensible to look at environmental issues from an investor’s perspective. I think this is the next evolution of finances – integrating environmental concerns, out of personal interest, into financial decisions.
What are your concerns about retirement and climate change? Feel free to share in the comments below.
Great article and interesting topic/comparison. I appreciate the link you draw between putting off preparing for climate change and putting off saving for retirement. Saving with an expectation of things like higher taxes makes a lot of sense. Another related topic I have been considering is how do we adapt the way we grow food to help us prepare for climate change? One off season or weather event has the ability to wipe out huge amounts of regional or global crop production.