A well thought out retirement plan will benefit you in the future. Not only will it protect you when you eventually retire; but also helps to eliminate the additional stress of living without an optimal monthly income.
“While people tend to primarily focus on getting healthier and travelling as part of their new year resolutions, it will be prudent to include retirement planning,” says Preenay Sathu, Wealth Manager at FNB Wealth and Investments.
“With the economy in doldrums and increasing household costs, we encourage clients to evaluate their current retirement plans to ensure that it is still in line with their long-term goals. A well-planned retirement will help you have a comfortably retirement,” adds Sathu.
Keeping abreast of your current retirement plan and contribution is important. Almost all retirement plans are subject to regulation and supervision in terms of the Pensions Funds Act 1956. Any employee can claim a deduction of up to 27.5 % of your total taxable income or remuneration, capped at R 350 000 a year. “Contributing to the maximum ensures that you have sufficient retirement savings in the long term and ensures that you get the maximum tax deduction possible,” says Sathu
Don’t over compensate when it comes to your retirement plans. “Your retirement plan needs to be realistic and firm focus needs to be placed on what you will need when you eventually retire. Health will always be a prime focus as we get older, so ensure that as part of your retirement plan you are able to ensure you can afford quality medical and health benefits,” explains Sathu
In addition, understand that your retirement annuity doesn’t get paid-out immediately. Therefore, it is advisable to have discretionary or voluntary savings that cover at least six months living expenses. Furthermore, ensure that you settle all your debt before you go to retirement.
Budgeting appropriately for household essentials such as groceries, electricity, water, and fuel is another step that will ensure that you retire debt free. This discipline should continue in retirement to ensure that you avoid relying on debt to meet your needs.
While there is nothing wrong with investing in a holiday home and travelling, one needs to be in the right financial position to do. Therefore, it is empirical to factor in these when planning your retirement to avoid running out of funds.
“Living a comfortable life should not end the day you stop working hence it is important to plan and think long-term to be able to continue living a balanced life after your working life. Consumers are encouraged to plan their retirement based on their lifestyle and as well as the life they would like to live when in retirement,” concludes Sathu.
Alan Straton
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