1. Start saving today
A very wise person once said: ‘The best time to start saving for retirement is the day you start earning money; the second-best time is now’. Putting saving off for another day is perhaps the most common error people make, especially when it comes to saving for retirement.
Those who start saving for retirement early give themselves a lot more than a head start. They give themselves the benefit of compound interest, where the money invested early does a lot of the heavy lifting. Money invested in a high growth, low-cost fund grows, and that growth generates further growth.
Give your money the best chance to grow and continue to contribute regularly, and soon enough you will have more saved than you could have imagined.
If you are not sure how much you can afford, start small. Just make a start. Once you begin to see your money growing it will help to keep you motivated. You can increase your contributions later.
Ideally, you should save at least 15% of your earnings for your whole working life to ensure that you will be able to preserve your lifestyle after you stop working. You may have started late, however, and need to save more than 15% to help you to catch up or, perhaps, you are planning to retire early so you will need to save more over a shorter period of time.
2. Make a plan and stick to it
Making a plan is a key aspect of success in most of life’s endeavours. Making a retirement savings plan and sticking to it is the best way to ensure success on this important journey.
Creating a plan is not complicated with the help of an online calculator, such as the one on 10X Investments’ website. Insert some basic information into the calculator (your age, how much you earn, how much you have saved) and it will build a personalised retirement savings plan for you.
You should revisit your plan regularly and tweak it where necessary, particularly when your life changes, such as you change jobs or land a salary increase. 10X clients can log on to the website at any time and see how they are tracking towards their savings goal.
3. Keep your costs down
Most of us know what most things cost us but for some reason few are aware of the cost of what will probably be their largest cash investment, their retirement fund. The retirement savings industry charges, on average, fees of 2-3% per year on retirement annuities. That is 2 or 3% of your total savings pot every year, a big chunk of money that could otherwise be growing and compounding in your fund.
The good news is that there are excellent, high performing funds, such as those at 10X, that never charge more than 1% plus VAT.
If you are paying too much, or not sure what you are paying, get 10X to do a free, no obligation cost comparison and fee analysis on your retirement fund: https://www.10x.co.za/campaign/fee-comparison
4. Don’t put all your eggs in one basket
Saving for retirement is important, but so is cash flow for daily life, including for unexpected emergencies. A sensible financial plan will include different savings products for different purposes, such as a fund for retirement and an emergency fund.
You would be crazy not to take advantage of tax incentives for retirement saving offered by the government. If you save into specifically designed retirement savings vehicles you get tax back on some or all of those savings.
Remember, though, that you cannot access those savings until you are 55 or older. If disaster should strike you or someone you love you might need to access some cash quickly. As a rule of thumb, you should have at least three months’ salary in an emergency fund that you can access quickly.
Having a plan in place that sets you on course to retire with dignity as well as a decent emergency fund are two key aspects of financial freedom.
5. Get your head out of the sand
Whether you think retirement is a million miles off, or you are certain you will make a fortune one day with a brilliant cellphone app/similar you will dream up, beware that you might just have your head in the sand.
Whatever reason you are using to not engage with the need to put something aside for retirement you are wasting precious time gambling with your chance of financial freedom.
Making a plan that sets you on course for a dignified retirement and executing it should be a simple and manageable process of small, regular steps. For more information download the free ebook on saving and investing for retirement
Brett Mackay is Investment Consultant and Group RA Manager at 10X Investments
The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250)
