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Retirement Planning Summarized

hendrik812

As human beings we tend to focus on the here and now, not realising that by failing to plan for the future we are planning for failure. This presents the greatest single challenge to retirement planning and ensuring financial independence.


Planning for retirement is not a single event in one's life, but rather a journey that should be planned for throughout your active working life. However, it is never too late to take control of your financial independence, even after retirement.


1 Importance of Retirement Planning:


  • Most individuals will spend 20-30 years in retirement, and these years need to be funded by 40-45 working years.

  • Many fail to save enough due to insufficient income, delayed saving, or dipping into savings early.

  • Achieving financial independence requires starting early, setting goals, and seeking professional advice.


2 Life Stages and Financial Planning:


  • Financial life is split into formative, energy, consolidation, and retirement years.

  • Each stage requires different savings strategies, with retirement involving a shift from accumulating wealth to preserving it.


"There is a whole new kind of life ahead, full of experiences just waiting to happen. Some call it ‘retirement.’ I call it bliss." – Betty Sullivan

3 Investment Strategies:


  • Investing early and understanding the risk-return relationship is crucial.

  • Compounding and portfolio diversification are key to maximizing growth and reducing risk.

  • Asset allocation should evolve from a growth focus before retirement to a capital preservation focus in retirement.


4 Types of Retirement Products:


  • Employer pension schemes (defined benefit and defined contribution).

  • Retirement annuities offer tax-efficient savings vehicles, especially for the self-employed.

  • Preservation funds safeguard retirement savings if changing jobs.

  • Discretionary investments like stocks, property, and fixed deposits supplement formal pension plans.


5 In-Retirement Planning:


  • You must select an appropriate annuity (income product) to last through retirement.

  • Decisions include whether to take lump sums and choosing between traditional annuities, living annuities, or composite annuities.

  • Maintaining a balance between income needs and preserving capital is critical.


6 Retirement Mistakes to Avoid:


  • Not saving early enough, poor investment diversification, and failing to preserve retirement capital when switching jobs can significantly impact retirement security.


“Retirement is a blank sheet of paper. It is a chance to redesign your life into something new and different.” — Patrick Foley

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