Setting up your own retirement package

Whether you are working for yourself, running your own business, or simply wanting to supplement company pension plans as an individual, there are two things you need to know: there are several options along the way, and always someone to assist you – and it’s a good thing to do.

• You may have a good pension plan with the company that employs you – however, if there is any possibility of adding to this, you must try to find ways to supplement a company pension. Your own private pension plan is always a good route. There are endowment policies, life insurance, investment accounts, and the ever useful retirement annuity. Many people build a package of these options alongside their company pension plans.
• Planning for retirement can be a daunting task, but it is crucial to ensure financial security in later life. Creating your own retirement package involves setting goals, creating a budget, and investing in various types of retirement accounts regularly and with discipline.
• Reasons for not saving toward retirement won’t come as a surprise to any self-employed person. The most common arguments include: lack of steady income; paying off debts; healthcare expenses; education expenses; and costs of running the business. But making your personal pension plan part of the budget is crucial.
• As a self-employed person or business owner, setting up a retirement plan is a do-it-yourself job. There are no matching contributions, no shares of company stock, and no automatic payroll deductions. Most experts recommend that your portfolio should become more conservative as you age. Whatever plan you choose, it’s important to start saving as soon as you can, and fund as much as you can afford.
• A retirement annuity is an insurance product that provides a steady stream of money during retirement. You can make an annual premium payment or choose the option of monthly premiums, and can choose whether you’d like pay outs in a lump sum or over time. Annuities income and investment gains grow tax free. Lifetime annuities are a good option for those worried about outliving their retirement savings. As a supplement to a main pension policy, an R/A can be extremely useful.
• However, personal retirement accounts allow you to invest in a wide variety of assets, such as stocks, bonds, and mutual funds. It’s best to diversify your portfolio, including index funds that track major sectors or indices, such as the S&P 500. In general, diversification among assets is important, with most investors increasing their investment in bonds as they get older, which are generally less risky than stocks.
• Taking into account your age, goals, and risk tolerance, you are very likely to need assistance in making the right choices. While your strategy should be to maximise your contributions every year as far as you can afford, you may reach a time when you need an objective eye to personalise your asset allocation in line with your profile. It’s usually a timely decision at this point to consult a professional financial advisor.

Key steps to setting up your own retirement package

Step One: define your retirement goals
The first step in setting up a retirement package is to get to grips with your retirement goals. Do you want to travel extensively or just stay at home and enjoy your retirement? What kind of lifestyle do you envision for yourself in retirement? Defining your goals will help you estimate how much you will need to save for retirement.

Step Two: create a budget
Once you have defined your retirement vision, the next step is to create a budget. This will help you understand how much money you need to save to achieve your retirement targets. Make a list of your monthly expenses and subtract them from your monthly income. This will give you an idea of how much money you have left over to save for retirement.

Step Three: consider the different types of retirement accounts
There is a variety of options with regard to retirement investment strategies. If you are working, then it’s best to consider your own private pension plan that can work in tandem with your employer’s offering. You can support this tactic even further by considering a retirement annuity. R/A’s are useful because the money in the account grows tax-free until it is withdrawn in retirement. It’s good to remember that retirement plans for self-employed individuals and small business owners, will see you with contributions that are tax-deductible, and an account where the money grows tax-free until it is withdrawn in retirement.

Step Four: determine your contribution strategy
Once you have chosen the retirement accounts you want to use, the next step is to determine your contribution strategy. Ideally, you should try to contribute as much as possible to your retirement accounts on a regular monthly or annual basis.

Step Five: review and adjust your retirement plan regularly
Finally, it is important to review and adjust your retirement plan regularly. Your financial situation and retirement goals may change over time, so it is important to make adjustments to your plan as needed. Regular reviews can help you stay on track and make any necessary changes timeously.

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