The coin rotation paradox and a lesson in retirement saving
Written by Tom Henson on December 08, 2017.
The coin rotation paradox is a classic brain teaser which consistently baffles. In fact, when a question in a SAT maths test in the 1980s was based on it, not one person chose the correct answer!
So here is the question: If you take two coins of exactly equal size and roll one round the other, how many rotations would the rolling coin make before getting back to its start point?
The coins have exactly the same circumference so the answer is one, right? That’s what the majority of people assume but it’s not the correct answer.
Get two identical coins out and have a try. Or have a look at this You Tube clip. You’ll see that the surprising answer is two. Explaining this mathematically is way beyond my abilities but suffice to say that when it comes to money, assumptions are often incorrect.
Which got me thinking about pensions and savings. In spite of damning evidence to the contrary, it seems that there are millions of people around the world assuming that they are going to be able to retire in their early sixties with enough to live off until they breathe their last. And with cost of living always higher than expected, many, many of them are going to be disappointed.
If you’re relying on a state pension, it’s time for a reality check. The Financial Conduct Authority in the UK have recently conducted a major survey on personal finances. Of the 13,000 people questioned they found that 53% of women and 33% of men expect to retire with just the state pension. But the full state pension right now is £159.55 per week, and that’s for those who have clocked up the required amount of national insurance contributions, which is often not be the case, in particular for women who are more likely to have taken a career break to raise children.
Could you survive on £159.55 per week? It might be possible but it’s certainly going to be a case of getting by when you stop working rather than enjoying your golden years. And don’t forget that the pension age is going up and up. If you’ve only recently entered the world of work and are in your twenties, you probably won’t receive a state pension until you are at least 70. If you want any choice about when you will retire, you need to start saving.
Shockingly, a third of the survey respondents said that they had not given any thought at all as to how they would manage financially in retirement. With life expectancy rising, that is, to put it bluntly, bonkers! The NHS is predicting that average life expectancy will rise to the late 80s by 2030 which of course means that many people will live well beyond that. Living a longer life is wonderful – if that life is a good one. For those struggling by, having to choose between heating and eating because their meagre state pension won’t cover both, those additional years may be a curse rather than a blessing.
It is clear that vast numbers of people are banking on pension arrangements and savings which are going to deliver far short of their expectations. But with proper planning, it doesn’t have to be like that. There are two main excuses for failing to save for retirement – people feel it is too late or that they can’t afford it.
While it is true that saving early is the ideal, it’s better to start late than not at all. As for affording it, I have dealt with many clients who have told me this and we have often managed to find areas where they can make savings in their day-to-day lives to free up funds to save.
If you’ve been taking the head-in-the-sand approach to retirement savings, I urge you to stand up straight and tall and look your future in the eye. For support and advice, feel free to contact me at firstname.lastname@example.org. I can help you put a savings plan in place which will give you a brighter financial future.