Retirement: five key questions you need to ask right now

Whatever you are planning in life, there’s that moment when you have to sit down and count the cash. How much do you currently have to hand, how much will the future cost, and what are you expecting in return?

Sometimes people save haphazardly, not quite sure what they are saving for; there is the reluctant idea that saving for a rainy day is a wise thing to do, but a long hard look at retirement costs can be a difficult exercise. So, beginning in the here and now, there are important questions you need to ask to ensure you are both forewarned and forearmed when the time comes to live purely on your retirement investments and savings.

One: how long are you expecting to work?

This is the first question that may bring you face to face with reality; it’s the question that will galvanise you into taking stock quickly, help you sort out priorities, and ascertain what is good or bad about your current situation with regard to the future. You will need to assess your age, your time left for your working life, the creep of inflation, technology changes, and how you are might bolster your retirement savings in the years left to you on a regular monthly income. You may discover you’ll have to work longer than you’d originally planned. You may also have to revise your spending habits to a more reasonable and sustainable level. Either way, the longer you can work without having to draw from your pension funds, the better.

Two: what do you plan to do in retirement?

This is important because it will structure how you save, and how you will be able to spend that savings. If travel is on your mind as a leisurely retirement pastime, then you have to begin that planning well ahead of time – or perhaps even have a special investment geared for that. Or will you still have children at college? In the past, the traditional retirement pastime of ‘doing nothing’ was acceptable, but today that is considered old-fashioned, not to mention well-nigh financially impossible for most people. Few people can afford to spend every day on the golf course. Today, people like to keep busy. You might even want to invest some money in starting a business. Consider your ideal time in the future – and evaluate your current retirement contributions. Are you able to meet the needs of the future?

Three: how will the money be generated?

Apart from a traditional company pension, you should have a pension fund of your own. In addition to both these options, you should have a sound investment account under the guidance of a financial advisor. These can include stock market investments, but also perhaps venture capital where you have invested in new businesses and can expect future returns. Pensions, policies, investments, property rentals, running your own business – these are all possibilities for you to secure a more robust income for your retirement. The more diverse your streams of income, and the more focused your engagement with your money, the more comfortable your retirement will be.

Four: how long will my money last?

This is a sometimes gloomy, but nevertheless pertinent question. And the answer depends on a range of circumstances such as your age at retirement, how long you might live, the cost of the standard of living you desire to maintain, the rate of return on investments and savings, what kind of medical expenses you might incur, and the impact of tax. To determine how much you might spend in retirement first examine current spending, estimate increases and various scenarios that may occur, such as illness, and then prepare a practical budget. This will help you to decide on what you can afford to invest, where to invest, how much, and how conservative you may need to be.

Pensions, annuities, policies and savings tactics can be confusing because these choices may determine whether you will be taking a pension lump sum or lifetime annuity payments and/or various other options. Assessments are always individual and personal. What your friend chooses may not be right for you. The assistance of a retirement planner is of crucial importance here – and don’t wait until one year before retiring to decide on this issue. Weigh costs with expected benefits as soon as possible, and make sure you grasp the bigger picture before taking decisions.

Five: how much is healthcare going to cost?

This is the elephant in the room. People are often unwilling to consider the inconvenience of illness let alone the costs. But retirement means you have to face the possible diminishment of income in conjunction with an escalation in medical care. For this reason, healthcare may have to be considered a separate item in relation to the rest of your calculations. What should be clear is that one medical assurance may not be enough, you should have a separate savings plan to cope purely with medical issues, not least of which would be eyes and teeth – the two vital elements that will suffer with age and which are therefore not covered well by medical aids.

There are many investment/saving products out there that would help to bolster medical finances in your retirement years – get discussing them as soon as possible, including decline into possible assisted living and frail care. Have you evaluated the present day costs? These need to be calculated into future costs, and revised regularly.

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