EIGHT RULES FOR A COMFORTABLE RETIREMENT

compounding of returns.

In addition, the earlier you start to save, the less you will have to save as a percentage of your earnings.

Lapedus says if you save for 40 years, you will need to save only 8.2 percent of your income to retire with a pension of about 75 percent of your final salary. But if you save for only 30 years to retire with the same pension, you will have to put aside 14.66 percent of your income.

as much as you can. Even if you start early, it’s advisable to ensure that your contributions and those of your employer are at least 15 percent of your gross income.

cash in your retirement savings before retirement. Lapedus says that if you change jobs, you must preserve your savings. Also remember that you are taxed at a punitive rate if you cash in your retirement savings before retirement.

rely only on your employersponsored retirement fund. It is unlikely that you will be able to maintain your standard of living in retirement if you do not build up additional savings. Your best options are an RA fund and a tax-free savings account, because both have tax breaks.

your overall financial situation regularly. To do this properly, you will have to find a financial adviser you trust to guide you through life’s ups and downs.

Lapedus says a good adviser can help you to get your finances in order, keep your retirement plan on track and invest in appropriate products, and advise you against investing in products that, because they are too conservative or risky, will undermine your retirement plan.

the factors that will affect your choice of pension. The main factors are:

◆ Longevity. If you are a man and plan to retire at the age of 60, you can expect, on average, to live to 84. If you are a woman and retire at age 60, you can expect, on average, to live to 88. If you reach age 65, your expected lifespan is 85 if you are a man or 89 if you are a woman.

◆ Risk. A guaranteed annuity is risk-free – you are assured of an income until the day you (and your partner) die. With an investmentlinked living annuity, you carry the risk that your capital might run out before you die. A withprofit annuity offers you something in-between: your initial pension and any future increases are guaranteed, but the increases will depend on how the markets perform.

◆ Inflation. If your pension does not keep up with inflation, your standard of living will decline. An inflation rate of six percent will halve the value of your pension every 12 years.

◆ Interest rates. Low interest rates will affect your pension if you have a living annuity or a with-profit annuity, because interestearning investments will always make up part of the investment portfolio. With a guaranteed annuity, the life assurance company bases your initial pension on interest rates at the time you buy the pension.

◆ Market fluctuations. Investment markets will affect your pension – particularly equity markets if you have a living annuity or a withprofit annuity.

With a living annuity, if, because of a fall in markets, your investments lose value but you continue to draw the same rand amount as pension, you will deplete your capital faster than would happen if markets were performing well. You might even run out of money.

◆ Personal commitments. You need to take account of your needs, as well as those of your spouse or partner and other dependants.

a retirement income strategy. Ensure that, long before you retire, you and your financial adviser have a strategy for converting your retirement savings to an income at retirement. The strategy should take into account your needs and the possibility of investment market turmoil at and in retirement.