Pension accrual with SPIN is more or less automatic, but that doesn’t mean you don’t have to do anything yourself. It is good to think about your pension from time to time. Will you have enough pension later on? Will you be able to continue living the life you are used to after you stop working? And will your partner have enough money when you die?
We talked about this with Jos Röling and Theo Hendriks. Both are still accruing pension; Jos only through the DC scheme, Theo through both DC and DB. How do they make sure they have enough (pension) money after retirement?
Theo: “Money matters have always interested me. It started when I was studying in Delft and advising other students. I’m still busy with finance a lot. It’s a bit of a hobby.’
Jos: “I have that much less. But of necessity I have started to look into my financial situation in recent years. In a year and a half I will receive my first state pension, so then you automatically become more concerned with your pension.’
Theo: “When I joined IBM, I could buy shares at a discount. I did that, and I’ve actually continued to do that. So I’ve been building up assets for later from the beginning. In addition to the pension I build up with SPIN.’
Jos: “I have quite a few pension breaches from the past. You used to have vesting periods, you only started accruing a pension after a certain period of time if you started working somewhere. Financial matters never really got to me. My wife and I did pay off our house in full, though.’
‘Paying off your house can be financially beneficial. But also look at other options.
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Theo: “Funny you should say that, because my wife and I have just very deliberately renewed our interest-only mortgage indefinitely. We fixed the interest rate some years back for 20 years, at a very low rate. But paying off your house can also be beneficial, of course. Every situation is different. We could have paid off our house, but I prefer to use that money to buy additional shares. Our housing costs are already extremely low due to low interest rates.’
Jos: “I have not had good experiences with investing. When I was made redundant by a previous employer, I received a golden handshake. I put that money into a standing right. This buys you the right to a monthly payment after your retirement. Your money is then invested for you. The advantage is that you only pay taxes when the money is paid out.
Unfortunately, less of that money remains than expected. The expected returns were far from being achieved. Since then I have been a bit wary of all kinds of financial constructions.
‘Not everyone enjoys dealing with numbers
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Theo: ‘I completely understand that. I see that with more people, especially after a negative experience with insurers and/or investing. You have to have a little fun, think about the long term and invest with money you can afford to lose. Then you can take any losses more easily. I find it especially exciting and fun to work with numbers.
I regularly check SPIN’s Pension Planner. Interesting to see how your pension is developing. At SPIN you can deposit extra money in the DC scheme yourself. I deliberately don’t do that. At SPIN you save for a lifelong pension. That is nice and necessary, but I also want to use part of my money in another way. I always say: I have my pension with SPIN and in addition a ‘small SPIN’ with the rest of my pension money. Moreover, I want to invest differently than is possible at SPIN. I take a little more risk. But taking care of extra retirement myself is always good, of course. That is possible with SPIN, or in another way. Everyone has to make that choice for themselves.
‘Make an overview with your expected income and expenses after retirement
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Jos: ‘So you have taken care of a lot yourself. I really needed help. A good friend of mine introduced me to a pension specialist 7 years ago. Thanks to him, I got a better understanding of my financial situation.
We made a list of expected income and expenses after my retirement. Thus, we made a financial planning, including expected major expenses. For example, the purchase of a new car. But also carefully considered whether there would be enough money for my wife after my death. A financial advisor I was able to hire through IBM calculated it all, including a pension for my partner and expected inflation. It looks like I’ve got it all sorted out now.
Theo: “I did the math too. I had a feeling it was okay, but I wanted to be sure. How much money will come in until I’m 90, and how much do I expect to need? I take into account 3% inflation per year. And – like Jos – with a number of expected major expenses. We want a new bathroom, so we need to reserve a certain amount of money for that. And I want to be able to help our 3 children financially when they leave home. Moreover, I want to stop working a little earlier myself. Travel more and play chess tournaments.’
‘Put all your future income and expenses in an overview
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‘These are all things that cost money, and so you need to have a clear picture of them. In the SPIN planner you can list all your expected future income and expenses. The planner works really well, also thanks to the examples provided by Nibud. And fortunately my assumption came true: if everything goes according to plan, there will soon be enough money. Also for my wife, should I die before she does.
Jos: “I have calculated for my financial plan until I turn 90, just like Theo. I have set aside extra money through bank savings in recent years because I want to have more money to spend in the first years of my retirement. And, of course, I too have looked at what is there for my wife when I die.’
Theo: “About eight years ago I was elected to the Works Council Pension Committee. I’m still learning there. After all, you don’t know what you don’t know. The world of shares continues to fascinate me. I invest quite offensively, so I deliberately take more risk. Of course you don’t have to. You can also invest via a tracker* if you want to take less risk. I like to invest myself, not through an advisor. I enjoy doing it far too much myself!
Jos: “It’s good to know what your financial situation will look like later. I now know that there are plenty of opportunities to work on your financial future yourself. There are several providers of pension investment accounts. And if you participate in SPIN’s DC plan, you can put extra money into that. You can also take care of extra retirement in other ways. Or – like Theo – you can invest for your retirement yourself. Then investing must be your hobby. And that was not in the cards for me!
* a tracker is an investment vehicle that attempts to track the performance of, say, a stock market index.