How a retirement annuity can help you live your best life for years to come
People are now living longer than in any time in history, but will your retirement savings last as long as you do? Waldette Stoffberg, business development manager at Glacier by Sanlam, breaks down the steps to a life worth living, from now until well into your old age.
6 Tips to help you save for retirement from your first pay cheque
Tip #1: Think about the 60-year-old you, even as you’re launching into the world now.
It’s never too early to start saving for retirement. “Planning for retirement is an essential part of your financial plan, even when you’re as young as your early 20s,” says Waldette.
Tip #2: Don’t go so low.
In your 20s and 30s, you might be contributing less than required to your pension fund. “Any percentage below 10% is too low,” says Waldette. “If you have an opportunity to increase this percentage annually, it is sensible to do that.”
It’s tempting not to save for something like retirement that is just so far away, but think of the experiences you’re having now, which you would still want to enjoy when you retire. Now is the time to imagine and build the life you want after your last pay cheque.
Tip #3: Add a retirement annuity (RA) to your financial plan.
Whether you’re contributing to an employee pension fund at work or not, an RA can propel you on your retirement savings journey – as a standalone solution, or as part of a retirement savings plan.
- An RA may offer you the opportunity to invest in a wide range of funds, risk-profiled solutions and a share portfolio, customised to suit your needs and risk profile. Once you invest in an RA, just forget you have it. Years from now, you’ll be ever so thankful for committing to an RA until you reach retirement age.
Tip #4: If you’re still young, don’t be too conservative in investing.
In your 20s and 30s, you have the advantage of more time to retirement than people in their 40s and 50s. Investing is a long-term pursuit, so while you’re young, you can take on more investment risk – potentially securing higher returns – as you will have more time to recoup any possible short-term losses.
Tip #5: Know the monetary values you’re working towards.
Knowing what you’re saving for and how much you can expect as a monthly income in retirement will help motivate you to start and keep going.
See the illustration below of how much you can save and the retirement income you could expect at 60. Let’s assume three investors all start saving R1 000 a month in an RA until they are 60. They each decide to increase their contribution by 10% every year.
|What do we know about each investor when they start their RA?
|Capital accumulated at age 60
|Monthly income drawn at 5% of accumulated retirement savings
|Monthly income drawn at 6% of accumulated retirement savings
|Monthly income drawn at 7% of accumulated retirement savings
|Candice is 25 with a moderately aggressive risk profile.
|R13 949 990
|Thandi is 35 with a moderate risk profile.
|R3 645 147
|Peter is 45 with a cautious risk profile.
Tip #6: Don’t go it alone.
An appropriately authorised financial coach will help you put together a holistic financial plan that takes into consideration your financial circumstances, needs, goals and investment objectives.
The values indicated are for illustrative purposes only and do not constitute advice. Consult with an appropriately authorised financial adviser to design a holistic financial plan for you that takes account of your unique circumstances, needs, risk profile and objectives.
Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.
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