Sevafrica.com
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Sevafrica.com
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When you ask a twenty-year-old when he would like to retire, a confident thirty is the general response. When you ask a thirty-year-old she may tell you that a yacht on the Caribbean should be achievable by forty. A forty-year-old takes a little longer to answer and ventures a hesitant fifty. At fifty years old, this question will elicit furrowed brows and mild hysteria.
A. Retirement Planning
In order to secure a healthy retirement you have to save 15% to 20% of your gross monthly income for thirty years. Unfortunately most of us wait until we are in our late thirties before giving retirement any serious consideration.
i. Personal provision
An easy way to increase your retirement savings is to contribute as much as possible to a Retirement annuity. There’s an immediate tax deduction and if your employer matches contributions it can be a real boost to your savings.
What is a Retirement annuity?
Simply put, a RA is a portable personal retirement savings vehicle that is independent of an individual’s employment relationship. Its purpose is to build a fund to provide income after retirement, either supplementary to other funding (such as a company pension plan), or as the principal source of income.
Anyone earning R5 000 or more per month can easily build a comfortable retirement fund. But only 4% of South Africans will ever achieve this.
ii. Employer provision
A worldwide pension crisis is looming and individuals can no longer rely on their corporations or government for their retirement.
We tend to think that our company pension plan is going to keep us in champagne and caviar. The truth is that if we rely solely on our company pensions, we’ll be trading caviar for pilchards. 40% of all company pensions pay out less than the Government pension does per month.
This is where many corporate individuals come unstuck. They believe that their provident plan will be sufficient. Not only does this money fall short of their needs, but also if they move jobs along the way and get paid out, the money is often regarded as a windfall and it gets spent on a holiday or new car.
Sound retirement investment decisions are vital as you get older and a good financial advisor can be an invaluable resource. Stay away from high risk or “too-good-to-be-true” opportunities. Investors in various cash pyramid schemes will soon tell you that it’s virtually impossible to recover from financial setbacks as you near retirement.
South Africa has a less than satisfactory savings culture with most salaried people saving less than three percent of their incomes. A wake up call is not sufficient any more — we need a bucket of ice cold reality.
Sevafrica Insurance Services is an Accredited Financial Service Provider who will help you plan for your own retirement.
Email us on insurance@sevafrica.com for more info or contact us on 031 5628020 and speak to one of our Financial Advisers today.
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