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Would retiring without sufficient retirement savings frighten you? During my financial talks many people express their concerns about retirement frightening them regardless their age, gender or occupation. Understandably so with statistics showing that less than 3% of South Africans can retire comfortably without having to downgrade their standard of living. The question you need to ask yourself: ‘how much retirement savings do I need and do I have a plan to build up sufficient savings?’

Just by looking at the timelines demonstrating the pre and post-retirement periods, is already frightening most people. There are multiple factors impacting on the pre-retirement period i.e. the period you have available during which you can build up retirement savings. Studying full-time after school, taking a gap year, taking unpaid leave, taking a few years off from work to look after the children, retrenchments and early retirement are directly impacting on the ability to build up sufficient savings for retirement.

With people living longer these days the post-retirement phase is equally frightening. A few decades ago the average living expectancy was 75 years. Retirement savings had to last for roughly 10 years when retiring at age 65. Currently people easily live to 95 years, which means retirement savings have to last for 30 years when retiring at age 65. In summary: the pre-retirement period to build savings is becoming shorter while the post-retirement period for which the retirement savings need to provide is extending. This certainly is a frightening thought.

It is important to review your position on an annual basis and to recalculate how much you will need for retirement based on your current position. Compile a plan to build up the amount of savings you will need. Don’t rely solely on pension funds and retirement annuities to build up a retirement portfolio. Add other assets to your retirement portfolio that will be able to generate an income for you after retirement. You can consider adding properties, unit trusts and businesses to provide you with an annuity income after retirement.

 During the next few weeks I will be discussing the 10 financial concerns many South Africans have in more detail – subscribe to my YouTube channel and follow all the discussions. 

 Written by Ronel Jooste

CA(SA), Financial Consultant and Coach, Blogger and Speaker

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