Time has a way of sneaking up on you.
This is especially evident at this time of the year, when people start saying, with some level of exasperation, that they “cannot believe it is this time of the year already.”
This is also true for retirement. Many busy executives, or people who are deeply engaged in their work – like CEOs and Company Directors – suddenly wake up to the fact that they are in the final stretch before retirement. They then call our office in a panic and ask to see someone urgently.
If you find yourself in that position, in the final year of work before retirement, there are a few pointers to consider.
1. Get independent professional help
At the risk of sounding self-serving, please get professional and independent help. You have been saving for a long time to reach this point and you will probably never be as wealthy as when you reach retirement, and you have a large lump sum to invest.
Unfortunately, there are a lot of unscrupulous or untrained product salespeople out there who would like to sell you a retirement product, not because it is the best for you and your lifestyle, but because it makes them a commission.
An independent financial advisor can help you navigate all the options, without being beholden to a single product or financial service provider.
2. See it as a process
In our book, The Ultimate Guide to retirement in South Africa, my co-author Bruce Cameron and I start the book by reminding the reader that retirement is not a single-step process.
Once you grasp this, you can take some time in planning different phases of your retirement, without being bullied into making a hasty decision.
For instance, you can retire and draw from your retirement benefits from age 55 if you are in ill health or in certain employment categories. You are also entitled to full tax benefits on your retirement benefits from this age.
At the same time, you may decide to indefinitely delay your retirement funds if you are still gainfully employed, or you have other funds.
The law does not require you to stop funding your retirement savings at a specific age, nor does it force you to buy a retirement policy at any specific age. This will most probably be decided by your employer, who would have stipulated a specific retirement age.
3. Get back at the taxman when you retire
If you are heading to retirement, make sure to get qualified tax advice as well. You are entitled to certain tax rebates at the age of 65 and additional rebates at the age of 75.
Retirees who have reached their mandatory corporate retirement age but are re-employed in an advisory position or on contract can also continue to invest in their retirement fund and gain the tax benefits thereof.
4. Understand your employment benefits
When you reach the final stretch before retirement, make sure to consult with your HR department to understand which benefits are part of your employment.
There are obvious benefits, such as medical aid contributions or matched pension fund contributions, but there may also be other benefits, such as life insurance or allowances for cell phones, travel, and other work-related items that you are likely to lose when you retire.
Many people are caught off guard when they realise how much additional costs land on their personal lap once they retire because they did not realise the company was paying for it, or partially funding it, in the past.
5 .Think of extending your retirement date if possible
You grow your pension the most in the last decade before you retire.
There are many reasons for this. Your funds reach a point where compound growth really starts making a big difference and on a personal level you often have fewer expenses in that period, as dependants leave the home, and you can push more money into your retirement savings.
If you are able to extend that period, you will be amazed at home much your savings can grow.
A certified financial planner and a tax-qualified advisor will be your best help during this last stretch. To get a broad idea of everything you have to consider prior to retirement, have a look at our best-selling book, The Ultimate Guide to Retirement in South Africa, and visit www.retirementplanning.co.za.