Retirement

How to live your best life until you’re 90

Living your best life is possible, and within reach, even years after you stop working. It takes some planning though, and recognition that it isn’t too early to plan the life you want after your last pay cheque. People are living longer now than any time in history, so celebrating your 90^th birthday is a real possibility. 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.

TIPS

6 Tips to a life worth living

Tip #1: Think about the 60-year-old you, even as you’re launching into the world in your 20s.

You may be starting your first, second or even your third job, but you’re definitely following the career you want, and success is a non-negotiable for you. You’re truly adulting and it’s not all that bad. You own your first car and have vehicle insurance and medical aid. You’re planning your first overseas trip, soon. But what about 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 too low.

So, you think you’re saving for retirement by contributing monthly to your employee pension fund at work, but are you saving enough? 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 your after-tax monthly salary is R15 000, then your contribution should be no less than R1 500 per month,” she says. “You have an opportunity annually to increase this percentage, and it really is sensible to do that.”

Many employers do not offer an employee pension fund, so saving for retirement is left entirely up to you to arrange privately, and let’s face it, you’d rather spend the R1 500 a month on shoes or gadgets, right?

“It’s tempting not to save for something like retirement that is just so far away,” says Waldette, “but think of the experiences you’re having now – in your 20s, 30s and even your 40s. Why should they stop the day you stop working at age 60 because you can’t afford them?”

Tip #3: A retirement annuity (RA) is a valuable addition to your financial plan.

Whether you’re contributing to an employee pension fund at work or not, here are some good reasons to invest in an RA:

It provides a kickstart to your retirement savings plan. An RA can propel you on your retirement savings journey – as a standalone solution, or as part of a retirement savings plan.
It offers flexibility. You can pause or reduce your RA contributions if need be.
You can enjoy tax benefits. A portion of your contributions to an RA is tax deductible, and you also don’t pay tax on interest or capital gains within an RA. So, you have more money to spend on yourself!
It ticks many retirement savings boxes. An RA potentially offers you the opportunity to invest in a wide range of funds, risk-profiled solutions and a share portfolio, customised to suit your needs and appetite for risk.
It’s affordable. A small monthly investment can make a big difference to your retirement savings outcome years from now.
Your savings are protected from creditors. Your retirement annuity investment is protected from creditors – they won’t be able to seize your retirement savings.
It can be tailored around your needs. Every investor is different, and your financial adviser will help you select the underlying investment options of your RA based on your particular risk profile.

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 the investor when they start their RA?	Capital accumulated at age 60	Monthly income withdrawn if it is 5% of accumulated retirement savings	Monthly income withdrawn if it is 6% of accumulated retirement savings	Monthly income withdrawn if it is 7% of accumulated retirement savings
Candice is 25 and her risk profile is moderately aggressive.	R13,949,990	R58,125	R69,750	R81,375
Thandi is 35 and her risk profile is moderate.	R3,645,147	R15,188	R18,226	R21,263
Peter is 45 and his risk profile is cautious.	R801,389	R3,339	R4,007	R4,675

Tip #6: Don’t go it alone.

An appropriately authorised financial adviser will help you put together a holistic financial plan that takes into account your financial circumstances, needs, goals and investment objectives.

The values indicated are for illustrative purposes only and do not constitute advice. Consult with an accredited financial adviser to design a holistic financial plan for you that takes your unique circumstances, needs, risk profile and goals into account.
Read more about the new two-pot system and its effects on your retirement savings here.
Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.
Sanlam Life Insurance Ltd is a licensed life insurer and financial services provider and a registered credit provider (NCRCP43).