Tuesday, September 15, 2015

Fruits of Labour

I read an interesting article about how squirrels have the habit of searching for, and then hiding the nuts that they find, but later are only able to find an approximate 10% of those hidden nuts from their respective hiding places. It seems like a waste of all those hard work in accumulating one's wealth just to not enjoy the benefits of the labour in the end. Maybe if squirrels could be taught or trained to save only some of the nuts that they find, and enjoy the rest while they still can, that would be best?

I have on several occasions spoken to friends and even family members about saving for old age. And this recently, a friend has forwarded a so-called advice about old age through Whatsapp; it got me thinking once again.

I think people in general are quite in agreement that there is a lot of virtues of saving for old age. But not everybody can agree on how best to consume that savings upon retirement. I notice that a popular view is that once one has retired, one should start tapping into his retirement fund, not only just for survival, but also for all the enjoyments in life. The reason, of course, is that one can't bring all his money and possessions to his grave—when he dies, whatever wealth he has would pass on to the next of kin.

I guess I can't fault anybody for wanting to enjoy his fruits of labour. After all, that is the main idea of savings for old age anyway. We try to set aside as much as we can in anticipation of old age when we are no longer strong, either physically or mentally, to earn. And then when that time comes, we start consuming whatever that's been set aside. That seems straightforward. The only problem with that plan is the unpredictable nature of the human lifespan. What could potentially happen in reality is that one is so afraid of missing out on reaping the benefits of his fruits of labour, goes on to consume his savings to pursue the things he likes or enjoys, thus quickly depleting his savings.

I happen to know firsthand of the story of a woman whom inherited a huge amount of money upon her husband's death. The amount of money could have sustained a rather comfortable life for her for many years to come. But she had a gambling habit, and she started liquidating on her inheritance at the casinos. She won some, and she lost some. But on the whole, it's always a net loss. When questioned, she said she's already old and won't live forever, and that she won't be able to bring her money to the grave anyway. She'd rather spend her money on the things that she enjoys while she can still enjoy!

That sounds fair enough, except that she finished all her money within 3 years or so, and now she's still not dead! Now at the age of about 70, she is struggling to make ends meet, and constantly worrying about money. Obviously she's achieved her aim of having nothing to bring to her grave, but one has to wonder how many more years she'll have to survive in constant financial difficulties.

There is a lesson to be learnt here. It's OK to tap into the retirement savings when one goes into retirement, but it's wise not to slam the accelerator all the way to the floor. And if somewhere in between he suddenly drops dead and his savings—or whatever's left of it—goes to his next of kin, that is still not really a total loss. It's OK to leave something behind to the loved ones. At least he won't have to live a stressful life in poverty during his old age. At least I would gladly choose this second approach anytime!

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