Warren Ingram’s 7 steps to retire comfortably

Warren Ingram, the co-founder of Galileo Capital, provided seven practical steps to ensure that you can retire comfortably.

Recent data revealed that only 5 out of every 100 salary earners in South Africa retire comfortably. “This is a real and very scary issue,” said Ingram on The Money Show with Bruce Whitfield.

Ingram is an award-winning financial planner, a personal finance commentator in the media, and has written two bestselling personal finance books.

He has been managing global investments for private investors for more than two decades through Galileo Capital.

Here are Ingram’s steps to ensure you have enough money for retirement.

Find your starting parameter

To calculate how much you will need to retire, Ingram suggested calculating your current annual expenses and multiplying this number by 25.

He suggested multiplying by 25 if you are below the age of 60 and multiplying by 20 if you are older.

This will give you the amount that you should have sitting in an investment portfolio. When you retire, the money in these portfolios will provide you with a monthly income.

Ingram specified that this amount has to be in investment assets and not tied up in, for example, your house, as you need an asset that will give you a monthly income.

For example, someone 50 years old whose annual expenses amount to R120 000 (R10 000 a month) would need to have R3 million set up for retirement.

Invest in a balanced unit trust

Ingram suggested putting your retirement savings in a good, balanced unit trust to account for inflation. 

Over the past few decades, these trusts have delivered annual returns of around 11%.

If you assume that inflation cuts into around 6% of buying power a year, this leaves 5% to use for retirement.

However, Ingram advised that people below the age of 65 should rather draw 4% a month and leave the other 1% in their portfolios.

This will allow the extra per cent to develop compound growth and hedge against any unpredictable events, he said.

Be realistic

Ingram warned against budgeting below your lifestyle. “If you do, you give yourself no scope, no budget, for the unforeseen,” he said.

The markets don’t deliver what they have in the last two or three decades – they provide much less, which is why you need to give yourself flexibility against the unforeseen.

Particularly for retirement funds, you need to consider the fact that you may live longer than you budgeted for and prepare for the possibility that your medical costs may increase as you age.

It’s a marathon

The 25 multiple amount may be far too large for many people to start with, said Ingram.

However, the lump sum is not as important as working towards closing the gap from how much you have now to how much you want to end up with every single year.

“And as long as the gap between what you have and what you need is narrowing, then you know you’re on the right path, and that’s not hopeless,” he said.

Balance

As important as it is to prepare financially for retirement, Ingram said it is also important not to sacrifice your comfort and happiness before retirement.

“Don’t be so extreme now that you give yourself this fright that you have to save everything and spend nothing because that’s not sustainable,” he said.

“That’s like going on a crash diet – crash diets don’t last because we are human beings, and we need joy in our lives.”

Not the end of the line

There is a misconception that your life and career have to end when you enter retirement, said Ingram.

However, this is not the case.

He encouraged retirees to use the skillset and experience they have built to keep working after retirement.

“There are lots of businesses, especially smaller businesses, that would desperately value those skills,” he said.

While these jobs may pay a smaller salary than a corporate job, it provides retirees with more flexibility, additional income, and more time to let their savings grow.

Retirement policy

Ingram spoke about the importance of understanding your company’s retirement policy. 

Knowing your policy’s restrictions and limitations will allow you to better prepare and give an indication of how much you will need to save in order to maintain your lifestyle after retirement.