Planning your financial goals for each stage of your life is one of the key factors towards achieving good, long-lasting, personal financial health. The same can be said whether you live in South Africa or anywhere else in the modern world and one of the most important provisos is planning for your retirement.
Although the majority of your monetary priorities will change as you progress through life, there is one overriding objective that you should be planning for, and that is income for when you retire. It is something that strongly recommended to all young adults, yet, by the same token, most of those young people ignore the advice.
When retirement seems a long way off
The reason you may be one of the many who don’t heed this particular guidance is your age. If you are between 18 and 30 years-old, retirement will seem a long way off. In South Africa, there is no legal retirement age. A specific age could, however, have been defined your contract of employment if you have one.
The age at which you could receive a state pension, however, dependent on your circumstances, is 60.
The maximum state pension in South Africa (also known as an old age grant) is currently set at R1,500. It is not a great deal of money, and should you find yourself totally reliant on this income when you do retire, you will probably find your lifestyle quite restricted in terms of what you were used to.
Taking out a private pension or retirement plan
The best option you can follow is to take out a private pension. If you start young enough, the payments you must make to provide yourself with a decent standard of living when you do eventually retire, will not be too restricting.
As regards the monthly pay-outs of private pension plans in South Africa, according to the buinesstech.co.za website, the average figure is R4,870; over three times higher than the state pension.
Most private pension companies will invest the deposits you give them in some sort of stocks and shares. In other words. There is an element of risk. However, the risk needs to be put into perspective as it is very small.
Stocks and shares fluctuate as we all know. But even when the stock market takes a big hit, it usually recovers after a few months. So, providing you are not forced to take out any funds when the market is at a low; if you can afford to wait a little, you should be all right.
All private pension providers will allow you to choose the level of risk you set – anything from low risk, to medium or high. Check here for a list of approved retirement fund providers. If you choose the right provider, they will manage your savings for you, making sure they are invested in the safest and most lucrative sectors of the market.
How much should you be setting aside?
You can get a basic idea of how much to invest and what sort of return you can expect when you do eventually retire by using the retirement calculator on the Old Mutual Life Insurance Company website.
The younger you are, the farther away retirement appears to be and the greater the temptation to ignore it. But there is no doubt that the younger you are when you start paying into a retirement plan, the larger the benefit when you do reach retirement age.