Don’t let life’s surprises affect your finances

The news that Oscar-winning actress Halle Berry has fallen pregnant at the age of 46, after having her firstborn at 41, came as a surprise to many, but statistics reveal that women are increasingly choosing motherhood at a later stage in their life.

According to Kirsty Buchanan, a financial planning coach at Acsis, a leading financial advisory company, the trend of delaying parenthood, highlights the need for consumers, both women and men, to evaluate and adjust their financial plan should they want to successfully reach their end financial goal, namely a secure retirement.

Statistics by the National Center for Health Statistics reported that between 1980 and 2004, the number of women giving birth at age 30 doubled, tripled at age 35 and almost quadrupled after the age of 40. A recent 2013 survey by The Baby Question also revealed that one in five women are postponing having children to 35 years or older.

This phenomenon is not uncommon in South Africa as for many women, when deciding when to enter motherhood, 40 years old seem to be the new 20, says Buchanan.

“Compared to a few years ago, women are now increasingly having children at a later stage in life which can impact on their retirement savings in that they may still have to support their children as they approach their golden years.

“These sort of life stage changes therefore need to be factored into a financial plan so that consumers not only ensure they have enough capital to retire with, but that they also continue to grow their investment during their retired years.”

She adds that for many consumers, reviewing, or even drafting, a financial plan is something that usually doesn’t warrant the effort and is often not given much thought until something changes in their life, such as having a child later on in life or suddenly losing a job. “This avoidance is likely to be detrimental to a consumer’s retirement capital, as highlighted in research which revealed that only six out of a 100 South Africans are able to retire financially secure.”

Given that many consumers will spend a considerable portion of their lifetime in retirement, careful consideration must be given to a financial plan. “Typically, someone who started work at 25, retired at 65 and survived until 100, which is not out of the ordinary anymore, will spend about 25% of their life being supported by their parents, 40% supporting themselves by working and 35% supporting themselves during retirement. This means most people have 40 years to save enough to support their lifestyle for 35 years in retirement. Although the retirement portion is 35% of the number of years they spend on earth, it is actually the most expensive part of their entire lifetime due to inflation.

“Whether we like it or not, we all face the challenge of ensuring that the income we earn during our working years supports us, not only while we are working, but also during retirement.”

Buchanan says that for consumers to successfully reach the end goal of retiring comfortably, calculated decisions needed to be made en route to retirement, similar to the way one would plot and plan a journey before a road trip.

“An investor should review her (or his) financial plan and investment strategy when planning for retirement, just as a driver should do a thorough safety inspection of their vehicle before embarking on any long-distance journey.

“This ‘safety check’ is a relatively quick, once-a-year experience and often identifies pitfalls or potential issues that may have gone unnoticed. In addition, this check not only provides peace of mind, but also the opportunity to make any changes that could avoid unforeseen costs and unnecessary delays in reaching our destination.”

She says that when reviewing personal financial plans and investment strategies, it is important to remember the intended destination, in this case retirement, and how we want to enjoy this ‘destination’ when we get there. “The important pit stops along the way need to be considered and built into the plan, such as settling short-term debts, paying off home loans, ensuring that our children are educated, and where possible, enjoying a few well-deserved holidays.

“It is not easy to plan ahead and forgo spending today when the future seems like a long way away, but it is essential for successfully preparing for retirement as life can sometimes throw us a curve ball. At the end of the day, all it takes to ensure a smooth journey is a little bit of time and personal reflection and the results will be worth it,” concludes Buchanan.