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5 tips to a financially secure retirement

05 Sep 2019

You should be planning for your retirement from the first pay cheque, but too often financial planning is put off until much later in life, leaving retirees with insufficient funds to fully enjoy their leisure years.

Just as you would discuss investing in a new house or car with your spouse, it’s important to make sure you’re both on the same page when it comes to your household budget in retirement.

Phil Barker, managing director of Renishaw Property Developments, says there are ways to ensure retirement is not marred by financial concerns - and it’s never too early to start.

“South Africa doesn’t have a culture of saving, but it’s important to adopt financially prudent habits early on if you want to enjoy your retirement fully,” says Barker.

 “These are supposed to be the golden years characterised by a hassle-free lifestyle of travel and relaxation. We want to ensure you get to this point, so here are a few guidelines to assist you along the way:”

1. Plan for inflation

Inflation is a fact of life and, too often, rising costs will cut into the buying power of your retirement savings. The ‘Rule of 72’ can assist you in planning for inflation.

Basically, you take 72 and divide it by the expected inflation rate of the next few years to determine how many years it will be before the value of the money halves. For example, 72 divided by 6 (inflation percentage) is 12. This means that in 12 years, the value of your money will halve so you will need to save accordingly.

2. Consistent savings

When it comes to pension savings, the rule of thumb is that you should be putting away 15% to 20% of your monthly salary from the time you start work. Many South African pension funds will offer employees contribution rates of between 5% and 20%, but it’s advisable to go as high as possible. The more you can save now, the better off you will be in retirement.

Renishaw Hills on KwaZulu-Natal's South Coast, offers homes and apartments with serene views of the sea set in subtropical surrounds.

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3. Tax-free investments

A tax-free savings account is a great way to boost your monthly retirement savings. These tax-free accounts have zero dividend withholding and capital gains tax with contribution limits set at R30 000 a year or R500 000 over your lifetime. You can contribute up to R2 500 monthly or a lump sum of R30 000 every year. These tax-free investment options also charge fixed fees.

4. Consider your retirement spending

When planning for your retirement, you need to consider exactly what your monthly budget will be. It’s important to factor in unexpected costs and is worth talking to a financial advisor to make sure your expectations are realistic. Just as you would discuss investing in a new house or car with your spouse, it’s important to make sure you’re both on the same page when it comes to your household budget in retirement.

A well-managed mature lifestyle village, where the majority of living expenses are covered by a single levy, will greatly assist in budget planning.

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5. Aim for a debt-free retirement

While debt can be a burden at any age, it becomes even more overwhelming in retirement. You need to try, as far as possible, to ensure you enter your retirement years completely debt-free. This means paying off all home loans, car loans and credit cards and not accruing any further debt in retirement. Do not live beyond your means - opt for a less flashy car and cut unnecessary monthly expenses wherever you can so that the excess funds go towards debt repayments.

Renishaw Hills, a mature lifestyle village on the KwaZulu-Natal South Coast, is one of the most sought-after retirement estates because it offers residents an affordable, quality lifestyle. It boasts a well-run homeowners’ association with a Levy Stabilisation Fund to ensure all necessary maintenance is administered while levies remain at inflation rate or lower.

For this amount, residents can enjoy state-of-the-art security, home-based healthcare and a range of sports’ and leisure facilities.

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