Retirement planning: What to do in your 40s
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.