Late starters can retire comfortably too
Don’t let the title of today’s article fool you. The best way to secure your standard of living through retirement is to begin saving as early as possible. Tuck away 15% of your gross salary for 35-years and you should easily retire with a replacement rat
The Short Haul Retirement Plan begins at 50
Williams isn’t suggesting 50 is the time to begin saving for retirement, but rather saying it isn’t too late to reassess your personal circumstances! A person in their late 40s or early 50s is going to have to address any savings shortfall out of necessity – and although the task is infinitely more difficult for a late starter – a lot can be accomplished in 15 years. There are several factors at play here:
At age 50 – says Williams – the following hold:
1. The retirement age of 65 is close enough for its importance and imminence to be recognized… You know your monthly salary is soon coming to an end AND that you have just 15-years to make sure you’ve saved enough to maintain your standard of living through retirement.
2. There’s more money available to put away for retirement. The percentage of your monthly gross that must go to savings – although having escalated exponentially from the 15% recommended for early starters – is no longer a “nuisance”. Mortgage bonds may have been paid off and high ongoing education will probably have ceased.
3. A time period of 15 years still allows for a fairly aggressive investment strategy. You can still channel the bulk of your savings into appropriate equity and property growth assets. It also makes sense to ensure the investment choices for your existing retirement assets are appropriate.
4. The 15-years to retirement mark is the perfect opportunity to review your paid up (or existing) retirement annuities and preservation funds. You should reassess all of your existing savings arrangements to maximize the potential investment returns over the last decade-and-a-half before going on pension.
5. Although you should be revisiting your comprehensive financial plan with your financial adviser each year, your 50th birthday is an ideal opportunity to obtain a new and independent perspective on your personal retirement plan.
6. At age 50 you have a clearer picture of your requirements through retirement. It’s probably a great deal easier to paint your income and expense picture through retirement when aged 50, than when aged 20, 25 or 30.
Your retirement age isn’t cast in stone
One thing the financial crisis has taught us is 65 needn’t be the “cast in stone” retirement age. Nowadays many individuals work beyond the 65-year stipulation – some by choice – others out of necessity. “It is interesting that age 65 is still considered by many to be the official retirement date,” says Williams. “This was the age arbitrarily selected by the Germans for their State Pension Scheme Circa 1870 – at a time when (actuarially speaking) most of them were courteous enough to vacate this mortal coil by age 66.”
South Africa’s thinking on retirement age contrasts with that of post-crisis developed world planners. While countries like France, the UK and Greece are trying to increase the average retirement age, thereby reducing the state’s financial obligations, our government is trying to reduce the age to just 60-years. Of course if you’re relying on government to take care of your financial needs through retirement you’re in for a rather treacherous time. The Social Old Age Grant is currently R1080 per month – certainly not enough to live it up in the style you’re accustomed to.
Editor’s thoughts: To ensure a comfortable retirement you should review your financial situation regularly. If, for some reason, you fall behind the savings curve, your 50th birthday is a great time for a detailed shake-up of your savings activities. Do you think 15 years is enough time to iron out any crinkles in your long-term retirement savings plan? Add your comment below, or send it to [email protected]
