1. Save your increase
Save your above-inflation increase. If your annual increase is above inflation, direct some, or all of the difference to your retirement fund. You lose nothing of your current lifestyle, but your retirement income will improve significantly (and even more so if you keep it up year after year).
2. Check your statement
Check out your annual retirement fund benefit statement, to see how much you’ve saved. Link that amount to a reliable retirement fund calculator, to work out how much of your final pension this will fund. If you have been saving for a few years already, you will be amazed at the number!
3. But don’t panic
Don’t check your fund balance every month, or your emotions may tempt you to do something foolish. The markets are choppy right now, so your fund credit will go up and down. If you are prone to financial motion sickness, look away.
4. Check your fees
If you are paying more than 1% pa, you are paying too much. Find a way to pay less, it will make a big difference in 20 or 30 years’ time.
5. Educate yourself
Learn about index investing, and why it is the way forward. Bottom line: this investment style will most likely give you a better long-term return than your fund manager.
6. Don’t chase the past
There’s a reason why every fund manager warns that past performance does not guarantee future performance: because it doesn’t. Based on many studies, there is no link between past and future fund rankings, even those based on five and ten-year returns (except for the funds at the very bottom – they tend to stay at the bottom, before they disappear altogether).
7. Don’t get lost in the moment
Stay above short-term economic or political developments. In the context of a 40 or 60-year savings life, it’s all short-term stuff.
8. Ditch the fortune tellers
The predictions of so-called experts may be more scientific than yours, but that does not make them any more reliable or lucrative. If their views had any economic value, they would not share them so freely.
9. Be smart with your bonus
Use some of your bonus to pay down your bond or credit card debt and lower your monthly instalments.
10. Have a plan
Every successful journey starts with two things: a destination, and a plan for how to reach it. Your retirement is no different. First, you need to work out your retirement goal. Next, you need to work out how much you need to save each month to reach that goal. A good place to start is with 10X’s easy to use retirement calculator.
Happy planning!
