One of the wonderful realities of retirement is that of longevity. People are living longer due to higher standards of living, healthier lifestyles, better nutrition, and advanced medical treatment.
The challenge this produces is ensuring you have enough retirement savings and medical aid provision for your extended golden years.
Many people rely exclusively on their company pension or provident fund for their retirement. The harsh reality is that this may not be enough.
Current economic conditions are not easy, and many people are struggling to make ends meet. Subsequently, this can lead to retirement savings being ranked as low priority. This situation snowballs because the closer they get to retirement, the more difficult it is to make adequate provision due to the reducing period available to save.
When someone says that they can’t afford to save for retirement, this means that they won’t be able to afford to retire.
Pay yourself first
One of the sagest pieces of advice is to pay yourself first. This means the first deduction from your monthly salary should be for retirement purposes. Consistent and planned saving will ensure that you will achieve your financial goals.
We are almost at the start of a new year – it is a time to make resolutions that are achievable and meaningful. As your retirement fund contributions are tax deductible up to 27.5% of your taxable salary, resolve to make additional voluntary contributions to your fund and let SARS pay part of your retirement benefit. If you have a marginal tax rate of, say 35%, SARS pays 35% via the deductibility of contributions in your hands.
Avoiding life’s potholes
Avoid retirement-inhibiting potholes you encounter in your life journey, like taking a taxed cash benefit if you change jobs. Rather, preserve your benefit for its intended application. You will thank yourself later!
Don’t be seduced by the false promise of withdrawing funds with the implementation of the “Two Pot” system to service your lifestyle. It is intended to provide a facility to have access to funds in the event of an emergency. By withdrawing funds, you are reducing your future financial security.
Inflation, especially medical cost inflation, is a serious concern, as it reduces the purchasing power of your pension. Prices of goods seem to be out of control, and it is naive to think this will not affect your pension.
Be positive and visualise your retirement years
A powerful tool is to visualise what you want your retirement to be like and actively imagine yourself in that position. Through positive thinking and visualisation, you are more motivated to plan accordingly, which will assist you in achieving your goals for retirement.
It is encouraging to see that the number of people making additional provision and preserving their retirement benefits on exiting a job is increasing, as they start to understand the implications and advantages of doing this.
After all, it is your money, and you are the one in control of it.