Analysts spend a lot of time on analysing graphs and trying to predict the future. But, as many analysts know, past investment performance is not necessarily a guide to future investment performance. Have you planned for the future?
Most people only worry about whether they will have enough money for their retirement when it is almost time to retire. Your retirement funds might and perhaps should be the single largest asset you will ever own! It is therefore important to start working on this asset as soon as possible.
You have to answer these two questions:
- At what age do you think you will retire?
- What percentage of your monthly income do you think you will need after retirement?
Age at retirement
It is evident that people now live much longer than in previous times. This means that you will need even more money for your retirement. If you retire young, you will need a lot more savings as you have to live off these savings for longer.
Income needed when you retire
You will probably need less money once you retire, but this depends on your expenses. Some expenses may decrease, for example:
- Your house may be paid-off in full
- Your children may no longer be financially dependent on you
- Your transport costs will reduce as you won’t have to drive to work each day.
However, some expenses may increase, for example:
- Medical costs can be considerably higher once you get older
- You may want to travel and go on holiday more often.
If your retirement funds (including pension) amount to about 70 to 80% of your total income at retirement, you should be able to have a comfortable retirement.
Start saving while you are young! It is very important to get the right financial advice to maximise your retirement savings. Whatever your age now, also consider alternative investment opportunities as a pension fund alone seldom yields enough to live comfortably during retirement. The property market is one such an opportunity.
Get expert advice before you put money in high-risk investments; “high-risk” means that you can get high returns but also that you can suffer huge losses. Don’t invest in pyramid schemes; in the end you are bound to lose money.
McMillan, M. 1993. Coping with retirement. Southern