Retirement decision falls in the study of behavioural economics, which like behavioural finance, combines "insights about psychology, economics and people's judgment and decision-making to generate a more accurate understanding of human behaviour". Consequently, retirement decision is often deemed as more personal and less predicated on dollars and dimes.
Behavioural economics is a well-developed area of economics, which reigns almost all aspects of human life. One hallmark of behavioural economics is rooted in the belief that the more appropriate information an agent uses in decision making the better the feedback and hence better the ultimate outcome.
Let us consider two types of decision making commonly embedded in behavioural economics. I call them: "Process 1," - decisions that are made automatically - no time to think, and "Process 2," - decisions that are reflective by nature - think, analyse pros and cons, and then act. Decisions in Process 1 are guided by spontaneous and impromptu feelings. For example, how do you react when someone pitches an egg at you? You duck - one that is instinctual.
Process 2 decisions are reflective in the sense that there are a lot of moving parts to think through logically and consider many established rules and guidelines before reaching the goal post. Thus, traditional retirement planning falls in the purview of Process 2. However, not all retirement decisions are reflective. There are non-financial factors which are Process 1 type decision making such as involving in voluntary community service, staying mentally and physically active in retirement etc.
In the US many people decide to retire when they reach full benefit social security age. This age is 66 years and 2 months for people born in 1955 which will gradually rise to 67 for those born in 1960 or later. In most other developed countries, there are some form of national pension or benefits system in place, to supplement retirees' savings. In the US, for example, the Social Security Program (SSP) has been offering retirees monthly income benefits since 1935. The funds in SSP are contributed by retirees during their years of active employment.
A retirement survey conducted by the US Census Bureau, among other things, found that the (a) average American retires at age 62; (b) average years of retirement life is 18 years.
With the increasing awakening consciousness of living a healthy lifestyle (regular physical activities and healthy eating), along with the development of modern medicines and high-tech surgical therapies people everywhere are living longer than ever. Unfortunately, as in Bangladesh, many of the longer living retirees lack adequate savings to support themselves for the remaining years of life. Many American retirees find themselves in the same financial disarray as their counterparts in Bangladesh. This dismal savings situation forces many Americans to continue working beyond the full social security age of 66. Unfortunately, public sector employees in Bangladesh do not have this option.
In Bangladesh the government employee's retirement age has recently been raised from 57 to 59 while that for freedom fighters the retirement age has been raised to 60. Currently, there is no plan to extend the retirement age further to accommodate promotion of junior public servants and to create vacancies for new generation waiting to serve in the public sector. These statistics indicate that all my friends and relative with whom I grew up with have already retired. Fortunately, there is no official retirement age for private sector employees. Therefore, retired public sector employees may choose to work in the private sector during part of their retirement years.
My retirement planner calculated that a family of two would need around $85,000 annually to continue maintaining the current standard of living through retirement years. Our thinking of retiring in Bangladesh is least predicated on pecuniary factors - even though we can have a more affluent lifestyle in Bangladesh with half of what would be needed to retire in the USA - barring any critical life-threatening illness and disabilities in store.
My contemplation to retire in Bangladesh is guided by various aspects of Process 2 behavioural economics as articulated above. What needs to be emphasised is that we have lived the American dream but being away from family and relatives in Bangladesh for nearly 44years had its own negatives. It should be underscored that we were never detached from Bangladesh though. Over the years, we kept our routine visit to family and relatives during every alternative Christmas vacation.
I have kept myself abreast of Bangladesh economic, political, social and cultural issues through watching television programmes and my writing in newspaper columns since 2005. Besides, I have developed a kinship with Bangladesh Bank (BB) ever since I was invited to offer a weeklong monetary/macroeconomic workshop in BB headquarter in 1999 by then Governor Dr. Mohammed Farashuddin. My kinship with BB grew stronger after having seven BB officials as my student at Easter Michigan University in 1997.
I have already crossed the SSP full benefit retirement age while my wife is approaching that age. If we do not think of retiring now while still in good health, then when? Retiring in the very near future will enable us accomplish things which could not be done before because of being preoccupied with many inescapable priorities. With retirement in good health we can spend time with family and friends, engage in community relationship, doing volunteer activities where our service will lift some individual or community to move ahead, and travel to see places of interest both inside and outside the country.
Flying to Bangladesh has always been very strenuous and stressful, which takes anywhere between 25 to 32 hours (one way) including lay-offs at airports provided we do not miss connecting flights. As we age such flights would be prohibitive - if not impossible.
Many of my friends have cautioned me that retiring in Bangladesh will be somewhat inhospitable, mostly because of the bureaucratic tangles, law and order, traffic gridlocks, risky road communication, weather condition, formalin-contaminated food stuffs etc. Alternatively, I could follow many Bangladeshis who retired in Kuala Lumpur under the MM2H programme. The MM2H (Malaysia My Second Home) programme is a government-sponsored package that offers non-Malaysians a ten-year renewable visa and various other privileges. One most desirable aspect in MM2H programme is TAX EXEMPTION given to remittance of offshore pension fund into Malaysia. Foreign-source income is not taxable in Malaysia. Bangladesh government may review the MM2H programme and consider if incentivising dual citizenship holders to retire in Bangladesh would be economically rewarding to the economy.
Flying time from Kuala Lumpur to Dhaka is less than 3 hours. Besides, Kuala Lumpur offers all the modern amenities and state of the art medical facilities while allowing frequent flying to Dhaka least costly, time saving, and free of hassles that travellers face when flying from USA. But living in Kuala Lumpur is not the same - not even comparable - as homecoming to Bangladesh. No place in the world can be more hospitable than the country of birth and that's the bottom line if we become hell-bent to retire in Bangladesh.
Abdullah A Dewan, formerly a physicist and a nuclear engineer at BAEC, is professor of Economics at Eastern Michigan University, USA.