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Retirement catch up

Apr 12 2012 07:38

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A Fin24 reader asks:

What would you suggest a reader does if he started his pension five years late and not at the normal 18 years of age? 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?

Heather Robertson, a consultant at Blink Consulting, responds:

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.

You also 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 biggest financial risks that could compromise your standard of living once you retire.

These include the fact that a longer lifespan would require savings to last longer, inflation will erode the purchasing power of today's rands, and the rising cost of medical aid and private healthcare. A high (money) withdrawal rate will deplete assets too quickly.

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 retire.

A checklist of some important retirement questions and considerations will include making a detailed list of your post-retirement expenses, and being as realistic as possible. Be sure to add expenses that 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.

Another consideration includes understanding 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.

 - Fin24

retirement  |  saving  |  pension fund  |  money


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