When we are young, retirement is so far away that we can be forgiven for not having it on our list of goals to achieve. The problem is that if we do not plan for those retirement years, our old age could be a financial disaster.
If we take an example in today’s terms, R1 million in savings will give you an income of R4 166.66 (5% annual income) before any taxes, if applicable, are applied. Could you survive on R4 166.66 per month? This is a reality check that you need to take into consideration.
What actions can you take to ensure your retirement will be a comfortable one?
Action 1 –Be consciously aware of your financial standing and draw up a retirement plan.
Draw up a retirement plan. This will consist of what you would regard as a comfortable retirement income, activities you would like to do whilst in retirement and the lifestyle you would like to maintain at retirement.
Action 2 – Start saving with a purpose.
The sooner you start saving towards your retirement, the better it will be for your retirement plan and for achieving your retirement financial goals.
Action 3 – Make use of the retirement savings vehicles available.
Make use of the retirement savings vehicles available such as a retirement annuities, as these will provide you with tax relief benefits and exemptions on capital gains tax, interest, and dividends tax within your investment. The tax treatment of retirement fund contributions allows you to contribute up to 27.5% or R350 000.00, whichever is the lowest of your qualifying earnings towards your retirement savings.
Action 4– Preserve your retirement savings.
When you leave one job to go to another, do not cash out your retirement savings. Rather preserve your money as this is your retirement investment. If you cash out your retirement fund it could set you back significantly.
Action 5 – Seek professional Advice.
Consult with a financial advisor if you do not know how to formulate a retirement plan. Having professional help and guidance can help you set your retirement plan in motion with confidence.
Action 6 – Work as long as you can.
Working longer allows you to save more towards your retirement before having to access it.
Action 7 – Become an entrepreneur at retirement.
With living costs going up every year, your retirement savings might need a boost to keep up with your lifestyle and also with the possibility of living longer. Look at a second income to supplement your retirement; this can include a hobby, rental property etc.
A successful retirement plan consists of a detailed retirement plan, getting professional assistance, reviewing you retirement plan at least once a year and being in control of your investment behavior. Plan well to retire well.