Planning For Retirement

Is personal financial sustainability after retirement a scary thought for you? Well it should not be.

Take the case of Malungisa Dlamini (64) who retired in March 2016 after 35 years of loyal service to his employer. His physical appearance belies his age – he has the agility of a 40-year-old and his mind is still razor-sharp.   His greatest source of peace is knowing he doesn’t have to rely on his children or relatives for financial assistance since he planned early for this period in his life.

“I worked in the private sector all my life and was advised by my employer to take a retirement policy when I was in my late 20s. I wasn’t too keen to do so but now I am glad I did so. I lead a comfortable life and don’t have the financial worries that most of my peers have; this can drive one to an early grave. The best advice I can give those in active employment is to start saving for retirement as soon as you can! Even if it seems a long way off, it pays to start planning for retirement as early as possible,” he says.

Everyone’s retirement needs are different. The Public Service Pensions Fund (PSPF) advises people to start planning for retirement as soon as they start their employment journey. The Fund notes that most people do not start thinking about retirement until their 40s or 50s and by then, they have passed up the opportunity to let their savings grow over time.

“You may not make much money during your early working years and trying to save money for retirement can be challenging. The reality though is that the sooner you get started, the better off you will be. Nonetheless, even if you are already close to retirement, knowing your options and making informed decisions based on your personal finances and goals will pay off in the long run.

“Downsizing and calculating a retirement savings goal is one thing you will thank yourself later for taking the time to prepare now. If you still have decades until retirement, you can ensure that it will be comfortable, as time is the most important factor when preparing for your financial future. Though getting started now may not seem terribly important when retirement is so many years away, it can have a huge impact on the size of your nest egg. When you begin saving early in your career, you do not have to save as much later to reach your retirement goal. When you include retirement planning in your budget at a younger age, you also develop good habits early on instead of trying to learn them later in life,” says the Fund.

The Fund says it is important to minimise financial mistakes and this means reducing one’s debts and avoiding new debt. The institution says if you focus on paying off your debt, that is another monthly bill you will not have to worry about after you retire and avoid a new debt at this point in your career, since your ability to repay the debt may decline when you retire. This, in turn, will reduce your monthly expenses.

The Fund encourages permanent and pensionable public servants to visit any of the Fund’s nearest branch office to request for their Benefit Statement so they can know where they stand.

Here are a few tips to help you get started;

• Ask a professional

If you are overwhelmed with where to start, meeting with a financial planner can be a great place to start. Financial planners can help you set your retirement goals and can create a plan on how to get you there.

• Stay focused and dedicated

Picture yourself at your ideal retirement age and think about your future self. What would you like to have the ability to do? What types of achievements do you wish for? Don’t let your guard down and get stuck in the “I work hard so I deserve X” mindset. You certainly do deserve it and should enjoy your life, but remember to keep a balance.

• Keep your spending under control

As you continue to work and grow in your career, hopefully, your take-home pay will as well. Instead of changing your lifestyle to match your income, set the extra money aside for retirement.

• Plan for you and your loved ones

Preparing for retirement also includes your family. Do you have children? How old are they right now? How old will they be once you hit the retirement age?  Are you still going to be providing for them once you retire?  Who will be with you once you retire? Those are the questions you want to answer as early as now to incorporate into your retirement plan.

• Explore different savings options

Saving is not merely depositing money into the bank. There are different savings options you can choose from. Start researching on the net, asking friends and going to your nearest bank or financial institution for advice.

• Hands off your retirement account

You created your retirement goals and plan for a reason, to retire. While unplanned events and emergencies may occur, try not to supplement those unplanned costs by dipping into your retirement account(s). Try having an emergency fund to cover any urgent needs instead.

Planning for retirement takes time. Be patient and prepare to run a marathon and not a sprint when it comes to working towards your retirement goals.

(Additional information sourced from PSPF April 2020 newsletter)