How a retirement savings plan can help future you keep living your best life
We’re living longer than ever before, which is great news. But it also means your retirement savings may need to last for decades after you stop working.
Waldette Stoffberg, Business Development Manager at Glacier by Sanlam, shares seven practical tips to help you start building the retirement you want, no matter where you are in your career.
These tips are detailed below.
Tip 1: Do something today that your future self will thank you for
Retirement may feel a lifetime away when you’re starting your career, but the earlier you begin saving, the easier it becomes.
Even small contributions in your 20s can make a big difference over time.
Tip 2: Don’t underestimate the power of saving a little more
If you’re contributing to a workplace pension fund, check how much you’re saving.
As a general rule, contributions below 10% of your salary may not be enough to help you reach your retirement goals.
If your employer allows you to increase your contribution each year, consider doing so.
A small increase now can have a significant impact later.
Think about the lifestyle and experiences you enjoy today. Chances are you’ll want to enjoy many of those things in retirement too.
The sooner you start planning for that future, the better.
Tip 3: Consider adding a retirement annuity to your plan
A retirement annuity (RA) can be a valuable addition to your retirement strategy, whether you already belong to a pension fund or not.
An RA gives you access to a range of investment options that can be tailored to your goals and comfort with risk.
Once you’ve set it up and committed to regular contributions, time and consistency can do much of the hard work for you.
Tip 4: If you’re young, don’t be afraid to think long term
When retirement is still many years away, you have time on your side.
This means you may be able to take on slightly more investment risk in pursuit of higher long-term growth.
Markets will have ups and downs, but younger investors often have more time to recover from short-term setbacks and benefit from long-term growth.
Tip 5: Apply the ‘Save. Boost. Preserve.’ principle in your retirement savings plan.
It’s really simple.
1. Start to save for retirement as early as you can.
2. Boost or top up your retirement annuity with an extra contribution every year to take advantage of tax benefits.
3. Preserve your savings. This means that when you change jobs, you preserve what’s in your pension fund in a preservation fund that will continue to work for you. Preservation also means that you treat your retirement savings as money that isn’t yours until the day you retire.
The three-part principle is the perfect strategy to ensure that you will be able to enjoy your life for as long as you are alive.
Tip 6: Picture the future you’re saving for
It’s easier to stay motivated when you know what you’re working towards.
Having a clear idea of the income you’ll need in retirement can help you make better decisions today. It can also show the value of starting early.
For example, someone who starts saving at 25 may build significantly more retirement capital than someone who waits until 35 or 45, even if they contribute the same amount every month.
See below for an example of this.
| About the investor and when they have started saving for retirement | Capital accumulated at age 60 | Monthly income drawn at 5% of accumulated retirement savings | Monthly income drawn at 6% of accumulated retirement savings | Monthly income drawn at 7% of accumulated retirement savings |
|---|---|---|---|---|
| Candice is 25 with a moderately aggressive risk profile. | R13,949,990 | R58,125 | R69,750 | R81,375 |
| Thandi is 35 with a moderate risk profile. | R3,645,147 | R15,188 | R18,226 | R18,226 |
| Peter is 45 with a cautious risk profile. | R801,389 | R3,339 | R4,007 | R4,675 |
The key message? Time is one of the most powerful tools in retirement planning.
Tip 7: Get expert guidance
You don’t have to figure it all out on your own.
A qualified financial adviser can help you create a plan that’s tailored to your circumstances, goals and retirement dreams.
They will determine your tolerance for risk and customise your financial and investment plan that is as unique as you are.
They can also help you stay on track as your life and priorities change over time.
Click here to learn more about Glacier by Sanlam’s retirement products.
Waldette Stoffberg, Business Development Manager at Glacier by Sanlam
The figures shown are for illustrative purposes only and do not constitute financial advice.
Speak to an authorised financial adviser to develop a financial plan that is appropriate for your personal circumstances, needs and goals.
Glacier Financial Solutions (Pty) Ltd (Glacier), a licensed financial services provider (FSP 770) authorised to act as an administrative FSP.
Sanlam Life Insurance Ltd is a licensed life insurer, financial services provider (FSP 2759) and registered credit provider (NCRCP43).
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