Retirement Planning: a good idea at any age
“Today is the second-best time to start investing. The best time was yesterday.” ~ Stuart Ritchie, director of wealth advice at AES.
We all know that the younger we start retirement planning, the better off we will be when the time comes to give up the daily grind and take some welcome time off. Not everybody has the vision and the motivation when young to begin a savings regime focused on what may, or may not happen in forty years’ time. And so we tend to let things slip while we enjoy spending our hard-earned cash.
However, there is often a wake-up period as middle age approaches, when people realise that they have not fully prepared a plan for retirement. Many worry that they may have left it too late, that they will never catch up, and maybe it’s not worth bothering once you become older and too underfunded.
This is patently not true. No matter when you begin a retirement plan, it is always worthwhile – and worth working with a professional financial planner who will be able to advise you on your options and possibilities, with a few tricks and strategies to build your savings into a viable format.
The fact is…it’s not that difficult no matter the age you decide to begin investing for those later years. There are a few simple steps to take – and even though these might be difficult to begin with, as the time passes and your mindset settles and you begin to see results, it will become easier and more fruitful with each passing year.
What will you be doing in retirement
What do you want to do after your formal working life is over? What kind of lifestyle do you envisage? Will you be working at a long-loved hobby? Will you want to open a small business? Will you be lying on a warm beach in the tropics? Will you be travelling to all the places you’ve longed to see?
Sometimes retirement presents a long time of nothing. Don’t let it drain you of ideas and motivation. Plan to reach goals in later life that you didn’t have time for while working. And to do that, you will need a financial plan set in motion today. Dreaming about your future goals helps you to plan for tomorrow. Don’t retire on one day, and wake up the next wondering what you are going to do for the rest of your life – or find that you have not funded enough to follow your dream.
Start saving today – just do it
It doesn’t matter how much you earn, or whether you have never saved a cent before, whatever you age, just begin a disciplined regime of saving as high a percentage of your income as you can. This is mindset territory. All it needs is a decision. Whether you earn ten rand or ten thousand rand, take away the number one. Live with 9 rand or 9000 rand. Pretend that’s all you’ve got, and begin by putting that extra away. Once you have some savings, it’s time to talk about investments.
Building on your savings regime
This is when things seriously knuckle-down. Retirement is a long way away, but you are going to need a lot more than you would today to survive comfortably. Ramp up your pension contributions. Find out from your employer what is the highest you can contribute from your salary and press for that. Learn to cut down on expenses. Check the engine: you now have a savings plan, and you have empowered your company retirement funding. So what is next?
You and your financial advisor
This is when you need someone to guide you, to be by your side. Trustworthy, focused on your benefit, and fully qualified. Whether you’re starting at 25 or 45 or even 55, a financial planning fundi will have a plan for you. They will investigate your assets, your lifestyle and your goals – and plan a strategy ahead for you that will protect and advance your financial standing and target your progress. This is an essential person in your life, whether you are investment savvy or totally loskop, a professional planner will have a good grasp of you as a person and your situation, and what is possible.
Tax, policies, and insurance
This is now the time to add insurance or endowments or private pension funding through retirement annuities or optional investments. You have your savings plan, you have your company pension plan – but now is the time to add insurance. You can choose either whole life insurance whereby others will inherit upon your death – or you can choose term life insurance that will last a specific period of time, and may include disability insurance as well.
You’re building up your retirement plan and you need to insure against risks wherever you can and wherever you can afford. There are policies that allow cash withdrawal benefits as well. Pure endowments are also a good way to save money. Work with what you can afford and get tax advice from your advisor; different plans have different tax implications.
Putting eggs in more than one basket
As you develop your savings regime, you can begin to strategise the allocation of assets. Make sure you have a spread across stocks, bonds and cash. The market will swing continually. Keep to your plan and stay calm, don’t let emotions overrun sense. Spreading your investments across various sectors and asset types can help soften the effects of big market fluctuations, so you can worry less.
Keep putting those fixed amounts away, add where you can, but hold the basic line of contributions no matter what. Your advisor will look to regularly rebalancing your portfolio, lowering your exposure to investments that have recently outperformed the market while increasing exposure to those that may be ready to grow. This is when things may become complicated, which is why you need the support of an experienced financial planner.
As you age, you may find your nest-egg will need some further nudging. Worry not that you may have started late, there is always time to max-up your contributions, to squeeze down lifestyle for a few years to catch up on value lost. Now is the time to contribute the most and the highest and take your retirement plan to a new level no matter your age. Now is the time to review your accounts, consolidate and manage with more attention and vigour. Don’t overload, but make that extra time to evaluate and perhaps sacrifice as much as you can in the last few working years.
Your health and long-term care
You have to keep reminding yourself that it is not only lifestyle that you are planning for, but also your healthcare as you age. Many people forget that landing up in long-term care situations is as much as 60% of their income for elderly people over 80. So make sure you plan for your nest egg to keep growing for as long as possible and to last as long as you may need it.
They may say that it’s never too early to get started because of the power of compound interest, however it’s also never too late to begin. Each decade should add power to your fortune. Determinedly achieving financial targets whenever you begin, is your key to success.
Empfin Solutions – the team that keeps your team happy
We’re an Old Mutual franchise with our primary focus on the three main areas of concern in everybody’s financial planning:
- Your Company Benefits – advising on, and servicing umbrella pension and provident funds.
- Your Personal Financial Planning and Provision – Estate planning, Wealth Creation and Retirement Planning.
- Your Assets – motor and household insurance.
Always striving to be a trusted partner in facilitating financial solutions for organisations and individuals, our dedicated team of fully accredited, experienced professionals have a passion for satisfying customer needs and providing a truly client-centric service.
Find out how you can benefit at: www.empfinsolutions.co.za