Will You Ever Retire? a massive dilemma for many of us.. There are times, especially when it’s been a bad day/week/month at work that every working person wonders to themselves if they will ever be able to retire. And sadly, increasingly many working South Africans are worried that, for them, the realistic answer is no.
Will You Ever Retire?
With company pensions fast disappearing, the cost of living rising and life expectancy increasing – for example, according to the South African National Census of 2011 65-year-olds in 2010 had remaining life spans of 19.1 years, nearly two years longer than folks who turned 65 in 1990 – the prospects of a comfy retirement can seem bleak.
But does it have to be that way? Do you really need to live with the idea that your 70th – or maybe even 75th – birthday will come around and you’ll still be toiling at your desk rather than relaxing and enjoying those fabled ‘golden years’? In all honesty, that depends on a number of different factors. Let’s have a look at three of the biggest of them:
You’re Not Saving
If you are not actively saving for retirement then yes, you could be looking at a working life that spans into your seventies. We understand that when your budget is already tight the thought of putting any of your hard earned pay cheque into savings can be hard to swallow. But it has to be a priority. Re-budgeting your monthly expenditures will often reveal all kinds of ways you can cut it enough that you don’t feel too deprived but still have some money to save.
You’re Saving, But Not in a Retirement Account
The fact that you are saving money for retirement is great. However, if you are simply stockpiling cash in a standard savings account then you really are missing out. Anything you save for your golden years should be held within a dedicated retirement account. There are lots of different options out there to explore, some better to suited to some than others but all offering their own set of benefits.
You owe it to yourself – and your future – to research these options and then move that money from your standard savings account into one of these instruments as soon as possible.
Will You Ever Retire? You Think It’s Too Soon to Start Saving for Retirement
You’re barely out of university so why on earth would you consider starting to save for retirement now? You don’t even own a house or a decent car yet, so first things first! Or maybe not. You see, the one thing many people fail to understand about saving for retirement is the power of time and compound interest.
You see if you start early, in say, your early twenties, you can actually invest less than an older peer and still come out ahead. Don’t believe us? Here’s a real life example:
Alice is 19, but thanks to her part time job can afford to begin investing R2000 in an interest bearing instrument (paying 12 percent) per month. Having done so for eight years however she stops, leaves the money where it is and then turns her attention to saving for a home. Over that time she invests R16, 000.
Following here? And then there is Anneke. Anneke marries early and then buys a home jointly with her spouse. That done, at 26 years old she too then decides to begin investing R2000 per month in an account offering the same interest rate as Alice’s; 12 percent. She then continues to do this for 23 more years, investing a total of R78, 000.
So Anneke was smarter right? Actually, although saving for retirement is always smart, it was actually Alice who was the savvier investor. You see, thanks to the power of compound interest by the time they are both 65 and ready to start thinking about actually retiring Alice’s little nest egg will amount to R2.288-million, while Anneke’s will be at R1.532-million. That’s R700 000 more, and yet clever Annie invested a lot less of her own hard earned cash!
In the end, no one wants to work forever, even if they truly love their job. Maybe these days some are happy to work beyond 65 because they still feel up to it. Which is fine. But by making sure that you save for retirement the right way even if you are one of those people at least, when you are ready to ride off into the sunset, you’ll be able to do so on your own terms.
Will You Ever Retire? the answer is up to you, we know this is a daunting and worrying question, to help put your mind at ease speak to a professional Financial Adviser who can help you find the answer to this question.