INTRODUCTION:
Your golden years, or retirement years, should be something that you enjoy however, more often than not people get a bit of a shock when they say goodbye to the corporate world and start to prepare for the new stage in their life.
The shocking discovery people make is that what they thought was adequate is not even close to enough.
This is why it’s important that you don’t simply rely on your company pension or provident fund, even in the case where you only had one employer your entire career, your money will probably not be enough for the day that you retired.
If you have changed jobs and you didn’t transfer your retirement fund, you will have even less.
The challenge for many people is the lack of long-term savings, specifically for retirement and some wealth management experts estimate that only 3% of South Africans will be financial independent on retirement - a big concern for the remaining 97%.
Another eye-opener is an estimate that those on an employer-backed pension fund may still need an extra 30% to 70% on top of their retirement pay-out. That is; if they plan to live comfortably after retirement.
The extra can only be provided by personal saving.
Some sophisticated financial planning models have been developed to show what people need to save at what stage in their lives or careers.
But there are three rules of thumb for retirement saving that anyone can apply:
1. Start saving today
2. You're never too young to save, and
3. You're never too old to start
Lifestyles differ, objectives are different and circumstances change so rigid formulas are not always appropriate.
The factors that are always important are a commitment to start, the foresight to develop a savings plan and write down goals and budgets and the determination to see things through.
Regular, long-term saving is always appropriate and becomes more vital by the day as life expectancy continues to grow for those who stay fit and healthy into their 50s and beyond."
Longer life expectancy is one of several trends affecting retirement planning.
Improved nutrition, better exercise and smart lifestyle choices like non-smoking mean many people stay active well into their 70s and 80s. This enables some seniors to defer retirement.
Another trend is to semi-retirement when active seniors with in-demand skills choose to work part-time or take on consultancy roles.
A less positive development is high healthcare inflation and increased need for prudent provision.
Equity market volatility is also a concern.
On retirement you may take up to one-third of your investment in cash. The balance must be used to buy a living annuity. If the value of your retirement benefit doesn't exceed the amount stipulated by law at the time, you may take the full amount as a cash lump sum.
So, how do you strive for financial independence and enjoy your retirement? By starting to save for it now!