Re­tire­ment plan­ning: What to do in your 40s

Finweek English Edition - - MONEY - BY SCHALK LOUW

Anum­ber of years ago af­ter at­tend­ing a pre­sen­ta­tion in Gaut­eng, I had to r ush back to the air­port in time for a f l ight to Bloem­fontein. There were a lot of road works, the weather was dread­ful and as a re­sult, I missed my f light. To add in­sult to in­jury, I was in­formed that it had also been the last f l ight to Bloem­fontein on that day. Ex­tremely em­bar­rassed, I had to cancel my pre­sen­ta­tion.

Keep­ing that in mind, the amount I need you to fo­cus on in this ar­ti­cle is R1 410 (and R1 430 above 75). This is not t he amount I lost with t he pur­chase of a new f light ticket, but the gov­ern­ment’s monthly pen­sion grant. If you, as a 40-some­thing, are sat­is­fied with this amount as a monthly pen­sion, you are ready for re­tire­ment and there’s no need for you to read fur­ther.

As for the rest, this is the make or break decade for your re­tire­ment sav­ings.

By now, you have hope­fully reached the prime of your ca­reer and your in­come at this stage should have reached max­i­mum growth. Ac­cord­ing to Unisa’s South African Jour­nal of De­mog­ra­phy, 40% of South Africans who earned R14 000 per month or more in 2006 fell into the 35- to 49-year-old class, com­pared to 23% in the 25- to 35-year and 25% in the 50-plus-year-old classes. Even though this data is nearly a decade old, it clearly shows that if you are aged 40, you need to rush to catch that “flight”. feels like your cred­i­tors and de­pen­dents are wait­ing for a por­tion of your in­come like greedy lit­tle hun­gry birds ev­ery month.

Now is the time to make use of the benefits your com­pany pen­sion fund or a suit­able re­tire­ment an­nu­ity of­fers. In the words of War­ren Buf­fett: “Don’t save what is left af­ter spend­ing; spend what is left af­ter sav­ing.”

Port­fo­lio Manager at PSG Wealth

TU­ITION FEES Ev­ery par­ent wants to give his/her child a boost in life, mak­ing a good ter­tiary ed­u­ca­tion of ex­treme im­por­tance. A 2011 Unisa study found that 97% of the pop­u­la­tion in the lower in­come group re­ceived sec­ondary ed­u­ca­tion or lower, while only 34% of South Africans earn­ing R750 000 per year or more, re­ceived sec­ondary ed­u­ca­tion or lower.

The ba­sic t uition fees for a BA de­gree for a f i rst year st udent this year will cost be­tween R20 000 and R37 000. Work this into your sav­ings strat­egy now, tak­ing an ap­prox­i­mate es­ca­la­tion of 10% per year on th­ese fees into con­sid­er­a­tion. There are some ex­cel­lent sav­ings fa­cil­i­ties avail­able out there, such as the new ta x-free in­vest­ment plans that re­cently came into ex­is­tence in South Africa.

Now is the time to be ex­tremely dis­ci­plined, and if you don’t want to miss your “f light” to re­tire­ment, you need to start plan­ning to­day.

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