Now’s the best time to save for your retirement

Retirement is an important issue and you need to give it due consideration.

The tragedy is that for most South Africans, retirement will always be out of reach. Most of us simply don’t save at all, and the few who do remain largely disengaged from the process.

It doesn’t have to be like this. Planning for your retirement is enlightening and empowering. It can even be fun.

Here are some important things to consider, and a timeline checklist to help you as you get closer to that momentous date.

Retirement realities

Take note of income adjustment. When you retire, chances are you will have finished paying school fees and your children will have moved out of home, so you’ll need less per month to live on.

In most cases, post-retirement income is about 50% to 75% of your “normal” income. That’s still quite a lot, so you have to make sure you have enough capital saved. Speak to a certified financial planner to ensure you understand exactly how much capital you’ll need before you can say farewell to work.

Look at your income options

As you approach retirement, you’ll have to decide how much of your savings you’d like to draw as a lump sum, and how much to use for an annuity, which will pay you an income each month. There are tax implications and you need to understand them. Again, consult a financial planner and decide on a solution that complements your lifestyle and circumstances.

Build up some cash reserves

Once you’ve completed your retirement claim form with your employer, the admin process linked to your retirement payout can take anything from four to six weeks, or even up to six months or longer if you’re a member of the Government Employees Pension Fund and you elect to retire out of this fund. This period of waiting can be financially stressful if you haven’t made provision for it.

Decide when to retire

A common mistake people make is that they decide to retire too early, when they haven’t saved enough. Remember, you’ll probably end up living much longer than your grandparents thanks to modern medicine. You need to plan for those extra years and make sure you have adequate capital saved in the right places.

Check in with your feelings

You might be old enough, but are you actually ready to retire? Retirement is a period of redefining your worth without a job or title. How will you continue to contribute to society?

Do you want to spend your golden years with your family, taking care of the grandchildren? Remember that book you’ve always wanted to write, and those places you’ve always dreamt of travelling to? Ask yourself, what preparations am I making now to achieve those dreams?

Health is the new wealth

Sorry to say but you’re not a spring chicken any more. Make sure you have sufficient medical aid and gap cover, considering the potential health issues for older people. At the same time, try to stay as healthy as possible. Physical health is linked to emotional well-being, and emotional wellbeing depends on the quality of your retired life. It’s all connected.

Manage your debt

As you get closer to retirement, start lowering or getting rid of debt. Try to settle your bond and vehicle repayments and don’t take on any new debt.

Retirement is a gift, and planning for it is actually not too complicated. You can access a list of financial planners on the website www.fpi.co.za

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