Planning to retire is no small task. In fact, it should be a lifelong focus. There are so many choices, goals and routes to follow. But whatever your path or strategy to ensure a comfortable retirement, you will need to begin planning as early as possible.
- Investigate investments: Along the road of life, you will be offered many solutions to developing a good retirement plan. This is the time to make sure you have worthwhile investment vehicles with reasonably predictable eventual incomes. It’s always wise to take up this evaluation exercise with the help of an experienced financial advisor. And once you begin investments with real intention, don’t raid the piggy bank!
- Plan for inflation: Inflation can eat away the value of retirement funds. When planning for retirement, you can pretty much assume prices will go up – and you need to incorporate these calculations into your portfolio choices. Keep your spending down to essentials, with a few extras and treats here and there to ensure you enjoy life along the way, but keep a grasp on how you want to navigate temptation.
- Stick to a budget: The best way to plan a budget is to know how much you can spend without ruining your plans. Your salary has incredible value for bolstering retirement funding. Pay yourself first; in other words attend to your savings and investments first, then your commitments, then sundries, and finally entertainment. A personal financial advisor will have the insight and tools to help you stay on track with your plan.
- Never forget Health – your biggest expense: Given the high costs of health care, focusing on physical fitness today is key to staying fiscally fit in retirement. Health care costs are often overlooked by retirees. Remember that as your income declines in retirement, your healthcare expenses begin to rise. Always keep healthcare coverage in mind, and keep up to date with the inflation in this vital sector.
- Pay off your bond: It’s not a good idea to retire with a bond still hanging over your head. Your home is probably your most expensive asset – and ultimately your most valuable. But it can cost more than you may be prepared for. Bringing your bond down as fast as possible, paying more in every month than you need to, will save you a ton of money in the long term.
- Get rid of debt as soon as possible: Any debt other than your bond should be paid off as quickly as possible. Consider contacting a debt counsellor well before retirement if you want help in reducing money owed. Try paying cash whenever you can – this is a good way to lower credit card debt as much as possible. Remember, if you keep having to pay down debt and high interest rates on debt, you are limiting the money available for retirement investment.
- Build an emergency fund for unexpected expenses: Over and above having a good investment portfolio, you should also keep cash on hand in case of emergencies – such as motor vehicle accidents or unexpected health issues. Always be prepared for trouble on the horizon, and be able to with it efficiently without dipping into your investment portfolio.
- Understand your time horizon – the sooner the better: The sooner you evaluate your investments, and begin a road of paying yourself first, the greater your nest-egg will become. Stocks have historically outperformed other securities, such as bonds, over long time periods. ‘Long’ meaning more than 10 years. Your time horizon will change, and you should be regularly rebalancing your portfolio with the guidance of a professional financial advisor over time.
- Know yourself – risk versus tolerance: How much risk are you willing to take to meet your objectives? Your portfolio manager will know the kind of investments that will best suit according to your risk profile. Markets will go through long cycles of up and down, and you need to remain focused and steady.
- Keep estate planning up to date: Estate planning is another key step. You will need the assistance of different professionals such as lawyers, tax advisors and accountants, all well-versed in estate planning. Life insurance is also an important part of an estate plan and the retirement planning process. Having both a proper estate plan, as well as life insurance coverage, ensures that your assets will be distributed in a manner of your choosing, and your loved ones will not experience financial hardship following your death.
It’s never too late to get started. When your planned retirement date is decades away it can seem like a distant event. But while starting early is best, you can start later and pick up on various methods to pack more into your plans. Set realistic, attainable goals while time – any amount of time – is on your side. Looking at income sources well in advance of retirement will give you time to adjust your plans, but diving in at a later stage can still help you create a more comfortable retirement. Talk to an investment professional about your circumstances and how you can save and prepare for retirement.
Find the top-class professionals who can meet your expectations
Complete Financial & Business Solutions (CFBS) comprises a group of top-class professional financial advisors and business analysts committed to sound financial and business solutions based on a highly personalised approach. Passionate about ensuring peace of mind through the in-depth analysis of individual financial and business circumstances of our clients, we are able to create unique solutions, and regularly review these solutions to consistently meet service expectations and lifestyle goals.
Find us at: www.cfbs.co.za
