A Fin24 reader asks:
I will be turning 60 in a couple of months. What would you
advise me to do now so that I am better prepared for my retirement in five
Heather Robertson, a senior financial adviser at Blink
According to research, most retirees regret not being better
prepared for retirement. When it comes to planning how you will retire (which
assets will be sold, which investments will be cashed in, how much income can
be drawn), it is a good idea to start preparing three to five years before you
Firstly, you need to define your lifestyle by making a
detailed list of your post-retirement expenses, being as realistic as
Be sure to add expenses your employer may be paying for now,
such as medical aid, cellphone and fuel. If you plan to do more travelling once
you retire, add these expenses to your list.
Secondly, you need to understand sources of additional
income. Will you be able to continue working part-time after retirement? Do you
own a property that you could rent out?
If you own a share in a business, will you receive a payout
at retirement or will you continue to draw an income? If you are concerned that
you cannot afford to retire, empower yourself by learning a new skill that could
generate an income after you retire.
Thirdly, you need to catch up on savings by investing extra
money into your retirement fund - pension or retirement annuity - where the
growth is tax-free (and a significant portion of your contributions is subsidised
by way of a tax refund).
Reduce debts and build up an emergency savings account.
Delay retirement if you need to – many people are choosing to work longer to
secure a better lifestyle in retirement.
Lastly, you need to assess the financial risks of
retirement. To get an accurate picture of what your retirement will look like,
you should first understand the five biggest financial risks that could
compromise your standard of living once you retire.
These include a longer lifespan requiring savings to last
longer; as the saying goes, retirement is a race between death and bankruptcy.
Inflation will erode the purchasing power of today's rands, and you also need
to consider the rising cost of medical aid and private healthcare.
If the investment portfolio you choose is too conservative,
your investment will not be able to outperform inflation and income withdrawals
will start to erode your savings much sooner.