How to plan for your retirement

By Simamkele Matuntuta
9/28/2020 | 5 min read

The same way that, millennials and generation z, are told to save money religiously, we are also told to start saving towards a retirement plan early on in our lives. And, when you think about it, it makes sense, right? Starting a retirement plan in your 20s instead of in your 30s gives you a ten years head-start, which means you get to save more.

However, the reality for many South Africans dictates that we live from hand to mouth because of our earning ability. This means that there’s little to no room to factor in retirement savings in our budgets.

But if your goal is to have a comfortable, secure, and fun life post-retirement, you have to take the right steps to achieve it. Doing this also breaks the poverty cycle, which burdens your future kids or family members with taking care of you when you’re old and too frail to work.

If you read below, you’ll learn more about retirement and how to plan towards a comfortable retirement.

How retirement works

In South Africa, the retirement age is 60. When you reach this age, it means you’re able to withdraw from any form of employment. After you retire, you earn a living from your retirement fund or old age grant provided by the government. While the latter is regulated and depends on the criteria stipulated by the government, the former is in your full control. You decide how much you earn once you retire based on the retirement plan you put in place. Your retirement income will pay your needs, wants, and overall living expenses.

Understanding retirement annuity

Retirement annuity refers to an investment plan, which helps you save money for retirement. Retirement annuity in South Africa is tax deductible but the returns that you earn from this investment plan is tax-free. Typically annuity premiums start from R500 per month, which makes saving towards your retirement possible if you want to secure a financially-fit future for yourself.

Define your retirement goals

Now that you understand how retirement annuity works, you can start defining your retirement goals. Doing this provides you with an opportunity to work towards something attainable. It’s like driving with a destination in mind. When you know where you are going, it’s easier for you to find a way there. So, determine where you want to go first before you start mapping out how to get there. This process requires that you identify how much you want to earn during retirement, how much your expenses will be, including emergencies such as health-related costs and more. Remember to consider your overall lifestyle and what comfortable means to you

Create a retirement plan

Once you’ve defined your retirement goals, you have to create a practical plan to help you achieve your goals. A retirement plan works like a normal budget in that you factor in all of the potential expenses. Use technology to your advantage, What this means is that there are several retirement calculators available to give you a clear and realistic overview of how much contribution you need to make each month to meet your goal. It will help you define the precise amount you can afford. This helps you plan better and without using guesswork.

Seek expert help

Truth is, even with technology at our disposal, we can’t confidently say we know everything. Additionally, you can’t allow yourself to take delicate personal financial planning such as retirement planning too lightly. That’s why it’s always advised to speak to an expert who has more experience dealing with the planning of this magnitude. They will be able to explain things you do not understand and provide you with clarity on any fears or concerns you might have. Most importantly, they will be able to offer you professional advice, which will be crucial in your journey to financial freedom at your retirement.

Many times when experts are mentioned, people fear that they may not afford an expert. While that may be the case, it’s possible to find an expert you can afford. At times, you’ll find that there are also opportunities to find an expert who might negotiate suitable terms with you or even assist you pro-bono. You simply need to be proactive and do your research. Talk to people in your circles, and who knows? you might find someone who knows someone.

Practise consistency

Once you have an investment plan in place, it would be in your best interest to be consistent in your monthly contributions. It’s the only way to ensure that your money grows. Consistency also guarantees you compound interest, which will be beneficial long term. If you want to learn more about what compound interest is, read our article on compound interest via this link.

Practise preservation

Often when people change jobs, they may feel tempted to take out their retirement funds to pay their current debts. While it’s important to pay your debts, you shouldn’t do it at the expense of your future. So, when you do move, preserve your funds and stick to contributing to it on a consistent basis.

Unfortunately, in South Africa, the stats for a comfortable retirement are at a staggering 6 percent. In addition to that, the majority of citizens earn way below livable salaries. This makes it more difficult to find extra money to put towards retirement investment savings. But it’s not impossible and it’s a personal journey that can be customised according to your affordability. So, consider your future carefully and put a plan in place to help you get ahead of your future.

By Simamkele MatuntutaTags:
  • Financial education
  • financial goals
  • GetUp Life hacks
  • Long-term savings
  • money
  • retirement
  • retirement savings
  • savings


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