Plan for comfortable retirement lifestyle

There are strong indications that South Africans are increasingly compromising their “nest egg” as a result of short term survival needs and in many other cases for short term luxuries.

This well established exhortation was reiterated by Henry van Deventer, Head of Business Development at Acsis, financial advisory company.

Van Deventer issued the warning as South Africans were preparing for the Easter holidays and as traditions goes many would be dipping into their reserves to treat themselves. This may come to compromise their life style at retirement age.

Van Deventer said in order for individuals to preserve this festive lifestyle, it is important for them to think beyond chocolate eggs and ensure that they are creating a comfortable nest egg for themselves and their family. A nest egg refers to a special sum of money saved or invested for one specific future purpose, whether it be for retirement or to pay university fees. “A nest egg is vital in terms of a comfortable retirement as many individuals find themselves without the sufficient funds to support their current lifestyle when they retire.”

A recent report by the Employee Benefit Research Institute in America revealed that the majority of workers surveyed were not saving sufficiently for retirement, with 37% saying they are significantly falling behind in planning and saving for retirement, and 30% saying they were less behind.

Van Deventer said that South Africans are finding themselves in the same situation. “The majority of South Africans are battling to save towards a nest egg and are instead turning to debt to fund their lifestyle. It’s been reported that nearly half of credit active consumers are struggling with debt repayments and with continually rising living expenses, such as petrol, electricity and food prices, the debt situation is likely to get worse for individuals, before it improves.”

It was also revealed that the average age of consumers falling into debt fell from 42 to 34 in the last five years. “This figure is extremely startling as these individuals are unlikely to save for a nest egg. It is advisable for individuals to start saving when they begin to earn a salary as the sooner you start saving, the more time your money has the opportunity to grow and ultimately ensure a healthy financial future.”

He added that no matter the situation individuals find themselves in, whether it is that they are in debt or only starting to save for their nest egg in their forties, it should not prevent them from starting to save. “It may seem like a daunting task putting extra money aside on top of a long list of monthly expenses, but it is never too late to start saving. While repaying your debt as quickly as possible should be a priority, it is still possible to put some additional money aside each month.”

Charn Swart, a financial planning coach with Acsis, provides five simple steps to get consumers ‘planning on track to successfully building a nest egg:

  • Contribute to a retirement fund: A retirement annuity, pension or provident fund plan is a savings vehicle that offers individuals a tax-efficient way to save for retirement. Because of the tax benefits, investors get a significantly better return over time.
  • Today is the day to start saving: There is no better opportunity to save for retirement than today. Many individuals think it is impossible to save each month due to debt repayments and monthly costs such as bills, rent and food but this can be done by cutting back on a luxury each month, such as a dinner at a restaurant.
  • Create a budget and stick to it: It is astounding to see how much money falls through the cracks if we do not keep track of our daily expenses. Drawing up a budget can very efficient for consumers that struggle to save. Checking how well you managed to stick to it at the end of every month is, however, the most important part of the exercise.
  • Evaluate your spending: We tend to vastly over-estimate how much happier better luxuries will make us. When the time comes to replace those big-ticket items like your car, television, home or lounge suite, try to resist the temptation to buy something bigger and fancier.
  • Look at basic investment options: A typical low-risk investment will see your money double every 12 years. Being more aggressive, in a prudent way, will allow your money to double every six years. This means that a R100 000 investment made at the age of 41 will be worth almost four times as much (R1,6m vs. R400 000) if a more growth-geared option is chosen up front. Choosing an appropriate investment strategy – and sticking to it – is one of the most important decisions we can – and should – make.

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