Blueprint for a comfortable retirement: early planning and careful asset allocation

When it comes to retirement planning, the adage “the early bird catches the worm,” holds true.

Glacier by Sanlam’s executive head of product development, Zaheer Bhikha explains the importance of distinguishing your needs from your wants to ensure a comfortable retirement.

Strategic planning is the key to achieving financial security after you retire and involves breaking down your financial needs into different categories. Bhikha outlines three considerations:

Your immediate needs require a guaranteed income stream

The first category is for your immediate needs, including essential expenses such as rent, food and healthcare. Securing a guaranteed income stream is crucial to meet these needs. Explore conservative investment strategies to ensure a high level of certainty in receiving a steady income.

Discretionary spending allows for your wants

Discretionary spending encompasses nonessential expenses like upgrading your car or going on a holiday. Discretionary spending allows for a more equity-based investment strategy. This approach considers market fluctuations and can be tailored to your risk tolerance.

Complete discretionary spending relates to your surplus assets.

Surplus assets represents savings and bequests. These assets can be allocated to a living annuity or an endowment. This category accommodates the uncertainty of how long you will live, allowing for flexibility in managing savings.

Once you have established your needs, it’s crucial to analyse the expected profile of each expense category over time. Key considerations include whether expenses will increase in line with inflation, the duration for which income is needed, and your overall financial outlook.

Match needs with suitable investment vehicles

Selecting appropriate investment vehicles is the next step in retirement planning. Depending on the expected profile of expenses, you can consider various financial instruments. As life expectancy (the length of one’s life) is unknown, for essential costs of living, Zaheer recommends conservative investment options. For discretionary spending, a more dynamic and equity-based strategy may be suitable, while surplus assets offer room for strategic planning based on the individual’s financial goals.

Ensure a fulfilling retirement

The ultimate goal of retirement planning is to ensure a fulfilling and financially secure life after leaving the workforce. By breaking down expenses into distinct categories, understanding their expected profiles, and aligning them with suitable investment vehicles, you can navigate your retirement years with confidence.

Contact Sticks Stiglingh at Strata BlueStar on 046-624-4948/ 071-612-7339 or sticks@stratabluestar.co.za for professional advice. Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider. Sanlam Life Insurance Ltd is a licensed life insurer, authorised financial services provider and registered credit provider (NCRCP43)