Retirement can mean different things for different people. For some, it is hopeful and exciting, indicating that our years of 9-5 working are over and we can begin a new phase of our lives, hopefully with less stress and the freedom to do as we please and indulge in our hobbies and interests. While for others, it represents something filled with uncertainty, something which they are not prepared for.
No-one wants to think about growing older and many try ignore it or think they have all the time in the world to plan and save for retirement. And there always seems to be something else more important at the time to pay for – a wedding, a deposit for a new home, school fees. Even for those of us who have been forced to save (thanks to a compulsory pension or retirement deductions at work), it might not be enough.
For those with none or minimal savings and considering relying on the state funds, the current government pension is R1600 per month and a good activity is to ponder if you will be able to live on that monthly right now. If your answer is no, it is essential to start looking at additional routes to provide for your retirement.
So, what you should do if you get to the age of 40 or 50 and you have not started saving for retirement yet or you realise that you have not put enough away to retire?
First off, don’t panic, you're not alone. In fact a GOBankingrates.com survey found that 28% of people over age 55 have no retirement savings. This is however the time to start making active budget and saving decisions in order to catch up. Diahann Lassus, the chief investment officer of Lassus Wherley, the US wealth management firm suggested to the Washington Post that people should plan their retirement like a vacation with a budget, allowing them to refocus how they spend their money so that they can make the most of our retirement savings. Married couples needs to create a joint budget so that they can work together to retire comfortably.
While it certainly pays to start saving as early as possible, it’s never too late to start, and there are still some moves you can make to get closer to achieving financial independence.
Here are a few ideas to get you started:
Calculate your assets and manage your debt. One of the single best courses of action you can take is to get yourself debt free before retirement. The sooner you stop overspending and pay down existing debt, the sooner that money can be redirected to investments.
Take account of your expenses. Most financial advisors will tell you to draw up your budget and from that they will be able to see if you can maintain your lifestyle after retirement, and if you are part of the majority who cannot maintain their lifestyle, you will either have to cut back or think of alternative options.
Boost your savings. Over the next 10 to 15 years, you'll need to supercharge your savings, ideally saving 30% or more of your salary in order to get your savings on track to meet your retirement needs. If you're unable to save that much, try start at 15% and look for ways to make small increases over time, for example putting your Christmas bonus directly toward your savings contributions.
Make some choices. If your workplace allows you to and you are able, you should consider delaying your retirement so that it does not put such a strain on your finances. It is also a good idea to look into getting another income stream – whether it maybe a part-time or freelancing job or from an asset that you own. This will help you to reach your retirement goals faster.
Consider your investment portfolio. In addition to shifting assets with preservation in mind, you should also consider how you can make those assets a little more liquid and flexible, just in case you need them unexpectedly.
Consider your health. As you age health care provisions and costs will play an important part in your life. Consider joining a medical aid now before you retire and could be penalised with late joiner fees or adding additional retirement savings for medical costs.