The reality of retirement saving In today’s environment, people are not saving and investing enough for retirement. But, how much is enough? Everyone’s calculation is different but there are rules of thumb that one can follow.
South Africans are not prepared for retirement, with several studies and surveys showing that we need to save more – and start sooner – if we want to maintain a decent standard of living in our later years.
BusinessTech has run two polls looking at how South Africans are preparing for retirement – specifically focusing on the age that people start saving for retirement and how much of their monthly salary they put away.
The results of both polls, which drew a combined 10,000 responses, echoed several research documents which have shown that South Africans are severely under-prepared for their golden years.
On paper, all retirement planning is perfect. You punch in a couple of numbers into a computer, make some assumptions on contributions, time period and growth on your investments and voila!, the answer comes back in an instant: you are on track or if you are not, the computer programme will tell you how to fix it by making additional investments or working longer.
All retirement planning programmes that I have ever done or seen, assumes an inflation-beating rate of return, depending on how bullish you might have felt about the future performance of your particular investment strategy. Most assume inflation plus 3, 4 or 5% in making these calculations.
I met a guy recently, I will call him Journey-Man.
Journey-Man is a guy who started asking himself some tough questions about savings and investments. At some point in the not too distant past Journey-Man started wondering if he had left things too late. He started thinking about this more and more and decided to take a journey of discovery.
Join us as we follow Journey-Man as he tries to answer that question ‘Have I left things too late?’
Millennials need to preserve their retirement savings when they change jobs, to accumulate enough money by the time they retire.
Millennials have low levels of long-term savings, on average, because they change jobs often and tend not to preserve their savings with each job change, according to a recent Sanlam survey to supplement its annual Benchmark Survey of employee benefits.
It’s Journey-Man here again, the late-starter!
What a strange week this has been. Last week, as a late-starter, I decided to start thinking deeply about my financial life. I want to find out what the outlook is, in terms of savings and investments, for the late-starter. Little did I realise that this would be a scary, introspective, and revealing exercise.
By DJ Thomson, 14 February 2018
RA’s are the main savings vehicle for self-employed persons to accumulate funds for retirement in a tax-efficient way. They are also popular as a top-up plan for salaried employees (which includes directors of companies and members of CC’s) who belong to pension or provident funds, to close the income gap at retirement. Smaller employers often choose RA’s for their staff over traditional pension schemes, thereby avoiding the administration and responsibility involved in operating the latter schemes1.
Most people know that contributions to an RA are tax-deductible up to a certain maximum, but few people realise that an RA may actually provide them with an opportunity to save tax in 10 different ways.
The decision to cash out retirement benefits when changing jobs is arguably the biggest contributor to many pensioners’ dire financial position.
International research suggests that millennials – the generation born between 1981 and 1996 – are most at risk since they tend to change jobs more often than previous generations and will need to overcome the urge to cash out their retirement benefits more frequently.
While there may be instances where it could make sense to cash out retirement benefits, it should be the last resort and it should only be done after carefully considering the long-term implications. Here are some things to ponder.
By: BayHill Capital
Medical advancements mean that we can hope to live much longer lives, but this raises the key question: how do you save enough money to ensure that your retirement funds don’t dry up too soon – especially if you’re a late starter?
The answer, says BayHill Capital Wealth Advisor Mbulelo Musa, is to make sure that you start saving as soon as possible, and to think carefully about the way in which you save and invest.
Once upon a time, economic writers and financial pundits decided to use the metrics of ‘income’ and ‘economic growth’ to measure the standards of living of people all over the world. It also, step-by-step, became the way in which we defined words like “Prosperity”, “Wealth” and even “Happiness”.