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Cape Town - There are three aspects to consider in financial planning, according to Peter Nieuwoudt, executive director of The Wealth Corporation.
These are the need for a proper investment strategy, personal risk management and succession planning.
The first aspect relates to your accumulation of wealth, the second to the management of your wealth and the third to the distribution of your wealth.
"Investment volatility is a huge challenge facing pensioners and managing this volatility is crucial, as well as seeing that inflation does not erode your capital," said Nieuwoudt at a retirement seminar hosted by The Wealth Corporation in Durbanville.
"It is important to note there are two types of risk. Firstly, short term volatility must be managed and secondly, one must beware of the impact of inflation on 'reckless conservatism' in the long term."
He cautioned that, although returns are very important, one must not chase returns at all cost.
"It should be about certainty of outcome at reasonable levels of cost," explained Nieuwoudt.
Other tips he gave were to try and defer your retirement date if possible and also to try and minimise the need to withdraw from your savings. Both will take some pressure off retirement aims.
"Do a financial reality check in the run-up to retirement and don't leave retirement planning until too late, and remember that passive income does not provide 'windfalls'," Nieuwouldt continued.
"Your assumptions should align with your budget and be cautious about trying to keep up with the Joneses.
He explained that wealth is the ability to live within your means.
"Budget and have financial discipline and make sure your financial adviser plays his most important role, namely to make sure you do not deviate from your retirement plan," said Nieuwoudt.
- Fin24
