At the beginning of 2020, who could ever have imagined how different the year would turn out? Recent years have proved one thing – being adaptable, flexible, responding quickly to change, and being resilient are traits we need if we are to survive and thrive in a world that’s constantly changing the importance of financial planning, and ongoing review of your retirement plan, to be able to retire with confidence and dignity when the time comes.
Financial planning for life events
We know that only a very small percentage of people can retire with independence, and not have to rely on family or the government for assistance. So, what does retiring comfortably actually mean?
According to Brand Atlas, a company that tracks the lifestyles of 15 million economically active people in households earning more than R8 000 per month, they discovered the following in their 2021 survey:
- 71% of people said they have made no provision for retirement;
- 79% fear they will not have enough to retire on or are unsure how much money they will have when they retire;
- 7% anticipate a comfortable retirement; and
- 74% feel they will have to continue to generate an income after they retire.
Financial confidence starts with a plan
Here are some tips to take into account, with your financial adviser, to ensure that you’ve covered all aspects of a sound plan.
- Retiring with confidence starts early in your life.
Retiring with confidence means starting to save as early as your first salary – even if you only contribute to your company’s retirement fund or a retirement annuity fund at that stage.
The key to future prosperity is to build on this foundation as your income increases. Advice from an appropriately authorised financial adviser, even at this early stage, is critical as you need to know what your risk profile is and whether you’re investing in the right funds.
If you’re a parent or guardian, investing in a retirement annuity fund for your child before they start working will deliver an unequalled benefit later.
- Plan your retirement with an authorised financial adviser.
There are many factors to consider when you approach retirement. How will your life and financial situation change when you stop working? What debts do you have that need to be settled? How many adult dependants rely on you financially? What income do you require, and will it support you for the years ahead?
- Know how much life and funeral cover you have.
Have you considered what will happen if you were to pass away? You need to know that your debts will be settled and that your children’s education will be taken care of. Life insurance and funeral cover form an important part of your overall financial plan.
- Be prepared for retrenchment.
There is no such thing as job security or guaranteed employment in today’s workplace. Almost two million South Africans lost their jobs in 2020.
Would you be able to protect your income if you lost your job?
Having an income protection solution will save you from having to take on debt to cover your day-to-day expenses in the event of a job loss.
- Remember increasing medical costs.
Medical insurance is important during your working years, and critical after you’ve retired as this is the time when your personal medical costs are most likely to increase Old age increases the risk of medical problems and typically results in increased healthcare and medical expenses. During the first two waves of the Covid-19 pandemic, the elderly were hit the hardest.
- Ngcobo is the business development manager at Glacier by Sanlam
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