Grow­ing your nest egg

RE­TIRE­MENT: Find out how long you have to save

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Dawie de Vil­liers, CEO of SEB, says the beauty of the cal­cu­la­tion is you don’t need so­phis­ti­cated maths or fi­nan­cial knowl­edge to use it.

“All you need is an up­dated re­tire­ment-sav­ings lump sum and your an­nual salary fig­ure — the cal­cu­la­tion couldn’t be sim­pler.”

The fig­ures are based on what is saved through tra­di­tional re­tire­ment ve­hi­cles — re­tire­ment an­nu­ities and work pen­sion funds — and do not in­clude other in­vest­ments such as homes, says De Vil­liers.

The ideal is to use the cal­cu­la­tion through­out your work­ing life, start­ing from your first year of em­ploy­ment. But even for late starters, it is still a use­ful tool and will give a clear in­di­ca­tion if you need to take ur­gent ac­tion.

De Vil­liers pro­vides some use­ful sav­ing guide­lines: Work­ing for five years or less How you start is a good in­di­ca­tor of how you’ll end up, so start sav­ing for re­tire­ment from your very first salary.

Sav­ing eas­ily be­comes a habit and it is al­ways harder to re­place bad habits than good ones. If you are won­der­ing where to start, it is al­ways good to con­sult a trust- ARE you on track with your re­tire­ment plan­ning?

There’s an easy way you can find out if you will be able to main­tain the life­style you want once you leave the work­place be­hind. San­lam Em­ployee Ben­e­fits (SEB) of­fers a use­ful cal­cu­la­tion. • Af­ter work­ing for five years, you need to have saved 1 x your an­nual salary • Af­ter 10 years, 2 x an­nual salary • Af­ter 15 years, 3 x an­nual salary • Af­ter 20 years, 4 x an­nual salary • Af­ter 25 years, 6 x an­nual salary • Af­ter 30 years, 7 x an­nual salary • Af­ter 35 years, 10 x an­nual salary • Af­ter 40 years, 12 x an­nual salary ed fi­nan­cial ad­viser, who will give you in­de­pen­dent and un­bi­ased choices. At five years Af­ter five years of re­tire­ment sav­ing, your in­ter­est starts com­pound­ing — in other words earn­ing in­ter­est on in­ter­est.

Not for noth­ing did Al­bert Ein­stein call com­pound­ing the eighth won­der of the world, says De Vil­liers.

And if you change jobs, don’t just take the re­tire­ment money and run — it’s the sin­gle big­gest mis­take peo­ple can make when it comes to re­tire­ment plan­ning, says De Vil­liers.

In­stead, hold on to those sav­ings in a preser­va­tion fund, so that the money can keep on work­ing for you by com­pound­ing fur­ther. At 20 years You have reached the halfway mark of your for­mal work­ing years and it is well worth tak­ing a very deep look at both your re­tire­ment sav­ings and your full fi­nan­cial pic­ture to en­sure you are on track for a pros­per­ous, happy re­tire­ment. At 30 to 35 years Now is the time to re­view how your re­tire­ment sav­ings are in­vested.

It is im­por­tant to start think­ing about what type of an­nu­ity you would like to pur­chase when you stop work­ing, says De Vil­liers.

Align­ing your pre-re­tire­ment sav­ings with your in­tended an­nu­ity choice will re­duce the im­pact of mar­ket move­ments or changes in long-term in­ter­est rates on your re­tire­ment in­come. At 40 years Most of us will be think­ing of re­tire­ment around now. Your next very im­por­tant fi­nan­cial de­ci­sion is how and where to rein­vest your re­tire­ment sav­ings so that you are able to main­tain your life­style, says De Vil­liers.

Many funds of­fer a de­fault an­nu­ity op­tion — which is a trusteeap­proved and in­sti­tu­tion­ally priced so­lu­tion suit­able for most peo­ple. You could also bring in your own fi­nan­cial ad­viser to con­sider the wide range of an­nu­ity op­tions in the re­tail mar­ket, says De Vil­liers.

If you choose to go this route, speak to your ad­viser in good time. And don’t be afraid to chal­lenge them to make sure they have re­ally shopped around with­out bias for the prod­uct that suits you best. — Fin24.

PHOTO: AR­CHIVE

Plan ahead for a com­fort­able re­tire­ment.

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