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CONSIDER THE LONG HAUL WHEN SAVING FOR RETIREMENT JANET ESTERHUIZEN says you need to balance current needs and wants with your future quality of life. With 30% of South Africans without retirement savings and many contending with retrenchments and rising debt, the picture looks bleak. Planning for retirement should ideally start with your first salary; however, it is never too late to start where you are. Setting aside money for your retirement each month is not enough to ensure you meet your retirement needs. Just as life is ever-changing, your retirement plan should adjust as your age, income, needs and circumstances change. It therefore requires a more strategic approach, determined by your life stage. The fact that retirement can feel quite abstract (planning decades ahead from your current reality) can make it hard to stick to a disciplined savings habit. But it’s critical to apply the principle of delayed gratification, and to recognise that there’s a trade-off between meeting all your needs and wants today and the quality of your future. Retirement planning is about the long term – it stretches over decades, involves choosing from a range of investment vehicles, is affected by a range of factors outside of our control, and it is different for everyone. When you started saving, whether and to what extent you live above or below your means, your family set-up and support – all affect what an appropriate retirement plan may look like for you.
Nevertheless, each life stage generally requires a certain strategy. As a rule of thumb, here’s what do at each juncture: In your 20s: You should start putting away money for your retirement from your first salary, aiming to save between 10% and 20% of your monthly income. In your 30s: If you have started saving in your twenties, it is important to stick to your savings plan and make an upward adjustment to your contributions as your income increases. If you haven’t started saving yet/started saving recently, saving for your retirement should now be a priority. By re-evaluating your budget to see where you can cut down on expenses and/or if necessary, you can make changes to your lifestyle to free up money for your retirement. In your 40s: If you have been saving diligently since your twenties, the same principles apply. It is also advisable to watch your lifestyle – do not automatically adjust your lifestyle as your income increases as you move into more senior positions.
