If you’re one of millions of South Africans who are on the other side of 40 and don’t yet have a substantial nest egg, it’s not too late. However, determination and planning are essential.
Spend less, save more, work longer
- Estimate roughly how much you’ll need to live on in retirement. Include food, housing, transport (car loan, petrol and maintenance) and healthcare. While your home may be paid off by then and you’ll no longer have work-related expenses, your healthcare costs will likely be higher.
- Calculate what will be available from sources other than your savings.
- Set goals for reaching the amount you’ll need to make up the difference between your pension and any other retirement funds you already have. Use a conservative rate of growth to avoid overestimating. The difference between what you’ll likely spend and how much you’ll have in guaranteed income is the amount you need to save to maintain your standard of living.
- If you’re worried about ever being able to accumulate enough money to retire, consider getting a second job and investing your earnings.
- If your children have left the nest and you’re still living in a big house that has appreciated in value, consider selling and buying a smaller, less expensive home; you’ll save on your bond payment, insurance, maintenance and taxes.
- It has become very important for all South Africans to work for as long as possible; a state pension today (2014) amounts to only R1 350 per month – hardly a life-sustaining sum – and you can’t control what happens in the investment markets or the economy.
Don’t take risks
Avoid the mistake of investing in high risk options to make up for lost time. It’s wiser to make safer, conservative investments at this stage.
Don’t skimp on retirement savings to send your children to university or college. While they can take out student loans, you can’t take out a “retirement loan”. They have their entire lives ahead of them whereas time is not on your side. The best gift you can give your children is your own financial retirement security.