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Age is a mindset – so there's plenty of life to live, even as we get older. So when it comes to retirement, most of us want to live the most comfortable and satisfying lives that we can when we eventually stop working. "Save monthly" and "start young" has been good, sage advice for many years. But why is it so important to start young? How do you calculate what you think you'll need? And what products should you invest in?
In this season's final episode of Money Heroes, our financial experts unpack these questions to empower you with the knowledge you need when saving for retirement.
Samke Mhlongo, a financial consultant and founder of the Next Chapter, gives us the four things we must know when we’re saving for retirement, and Jesmane Boggenpoel, chairperson of technology solutions company Sybrin, gives retirement tips for those who are making moves within their career.
When many people think about retirement, they often think of it in the same terms: "Am I saving enough? Will my wealth support me once I stop working?"
But an aspect that is often forgotten about is whether you have a plan to scale down your lifestyle for the eventuality of having more time on your hands and less responsibilities to take care of.
In South Africa, only 6% of people can afford to retire with the same lifestyle they had before retirement.
You don't want to be a statistic.
Deputy CEO of Momentum Metropolitan Jeanette Marais draws on her wealth of experience to empower you with the best success tips for thinking about your retirement.
1. Calculate how much you need – If you want to know how much you need to retire comfortably, do a simple calculation that works out how much 17 times your annual growth salary is. This estimated figure may need to also take your ability to draw an income from your investments into account, but still maintain its value for many years.
2. Join forces with a financial adviser – Once you've worked out how much you need, a financial adviser will help you create a comprehensive and disciplined plan for you to reach your retirement savings goal, in the available time you have left, using the right tools to do so.
3. Work for a little while longer – If you are 60 years old and you can postpone your retirement by another five years, you actually "score 15" in return. You add another five years to contribute to your retirement fund, plus five less years to be dependent on your retirement income and five extra years to earn compound interest. This extra time you've invested in your retirement will benefit you greatly.
4. Don't forget to scale down – Your life will look different once you retire. You will have a lot more time on your hands; if you have children, they will probably be independent; and your long-term debt will probably be paid fully. Scaling down helps you to begin the journey into your new life.
It is never too late to create a great retirement savings plan for you, at the stage of life you find yourself in today. Join forces with an expert financial adviser for more on how you can create the best retirement savings plan for you.
For Theo Vorster, CEO of Galileo Capital, thinking about retirement is thinking about timelines and how best to make use of the time you have in your life.
Whether you are starting your career, in the middle of it, or facing the last few years of work at 60, there are things you can do at every level to set yourself up for a successful retirement.
Nobody wants to drop their standard of living once they reach retirement, and the money you've saved needs to last you for 20 to 30 years.
Here are Theo's success tips for making the most of the time available to you when you are saving for retirement.
Success Stories: Samke Mhlongo
Samke Mhlongo is a financial wellness consultant and the founder of The Next Chapter.
For Samke, there are four things you should think about when you're planning for your retirement. You must consider the following:
Where you are – What does your financial planning for retirement look like? How much do you have to invest? How much can you save a month? Are you investing monthly or by lump sum? Knowing the answers to these questions will help you understand what steps to take next.
Where you are going – How much will you need at retirement age to live on until your passing? Legally you can retire from age 55, but not everyone stops working at that age. Plan ahead by knowing how much you will need, at the age that you will need it.
How long it will take – Now that you know where you are, and where you're going, you need to ask how long you have until retirement. Knowing how many productive years you have left, to the year, enables you to accurately calculate how much you could save over that timeframe.
If you know where you are, where you are going, and how long it will take, you are ready to invest in the right type of products.
Success Stories: Jesmane Boggenpoel
Jesmane Boggenpoel is a successful businesswoman and chairperson of technology solutions company Sybrin.
She switched from a corporate job to running businesses mid-career, and gives us her retirement success tips for those in similar positions.
1. Start saving as soon as possible - It doesn't matter the amount, whatever you can, start putting it aside for retirement.
2. Resist the urge to withdraw – If you've moved jobs or moved from the corporate world to your own business, resist the urge to withdraw that pension fund. Put that aside for its original purpose: retirement.
3. Flexible options – Don’t let not earning a steady income stop you from contributing to a pension fund. Find an option where you can have flexible contributions depending on your monthly earnings.