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Working your life away: What happens if you can’t afford to retire

10 considerations to help you get on track.

It’s widely known that the majority of South Africans cannot afford to retire comfortably and will have to reduce their standard of living at retirement to ensure they don’t run out of retirement capital. However, as a result of unfortunate circumstances, lack of savings or falling on hard times, some South Africans find themselves in a position where they simply cannot afford to retire and are not sure if they will ever be able to. This is a precarious position to find oneself in and you would do well to consider the following:

  1. Take care of your health
  2. If you have to keep working for financial reasons, bear in mind that your health is quite literally your wealth. Besides the medical costs that come hand-in-hand with an injury or illness, time off work and the resultant loss of income can set you back financially. Medical aid membership is essential, even if you have to downgrade to a more affordable plan option. Whatever happens, do not cancel your medical aid membership as this may result in penalties being charged later on if you wish to re-join a medical scheme. If possible, consider putting a gap cover benefit in place to cover the shortfall between the amount charged by a service provider in hospital and the amount reimbursed by medical aid. Taking care of your overall health is also important and this means leading a healthy lifestyle, eating whole foods, getting sufficient exercise, moderating alcohol consumption, not smoking and reducing stress, something which can be difficult when faced with continued financial worries.

  3. Look for alternative sources of income
  4. Being fully dependent on a single income stream can be risky, especially in a stagnant economy. It might take some creative thinking and research, but it is a good idea to find ways to generate an additional source of income. There are numerous opportunities in the gig economy for older people to generate an income such as tutoring, transporting children, au pairing, house-sitting, pet-sitting or operating an Airbnb. If you have a hobby or passion, consider ways of monetising your product or service.

  5. Budget and cut costs
  6. Undertake a ruthless budgeting exercise during which you interrogate each line item. Are you living in too much house? Are you driving too much car? Do you need that gym membership? Are you using DStv? Every cost that you can cut can be used towards building a nest egg and reducing financial pressure. Making a concerted effort to get rid of your debt as quickly as possible. While you are servicing the debt it is unlikely that you will be able to save for the future. Having debt also places you in a particularly risky position if your ability to generate an income is compromised for whatever reason.

  7. Speak to your children and family
  8. While you may recoil at the thought of becoming financially dependent on your adult children or a family member, if there’s a possibility that it could happen then you owe it to them to be open about your financial affairs sooner rather than later. Your adult children are likely to have families and financial priorities of their own and would appreciate being forewarned about your possible need for financial assistance.

  9. Think carefully about where you live
  10. Where you choose to live is important because poor decision-making in this regard can have big financial implications for you. If you have adult children, living close to them will make it easier for them to care for you if the need ever arises. If you live in a remote area, bear in mind the costs of travel should you want to visit family or need medical care in a larger centre. Moving regularly also involves unnecessary costs such as transfer fees, rental deposits, service connection fees and moving and storage costs.

  11. Insure your important belongings
  12. Make sure that your important belongings are adequately insured because if you are cash-strapped it might be difficult to replace a broken or stolen item. Importantly, ensure that the tools of your trade are insured because without them you cannot generate an income.  

  13. Don’t take unnecessary risks or fall for investments scams
  14. Very often people who find themselves in dire financial situations fall victim to investment scams and fraud. Desperate for higher returns and quick wins, many people fall prey to fraudsters promising unrealistic returns and a sure-fire investment win. Be overly cautious of anyone who approaches you with an investment scheme that sounds too good to be true. Chances are it probably is.

  15. Check your investment fees
  16. Being particularly price-sensitive, it is essential that you are not being overcharged in respect of investment fees. High investment fees can eat away at the little savings you have and will keep you working for longer. Find an advisor who charges a professional, market-related fee for his advice.

  17. Use your pensioner discounts
  18. Do your homework when it comes to pensioner discounts and then use them to your advantage. Many large retailers, shopping malls, restaurants and entertainment facilities offer very favourable pensioner discounts – all of which can make a huge difference to your cashflow.

  19. Get rid of deadwood
  20. Get tough on adult children or other family members who are draining your finances. Like a leaking bucket, you can never save towards your retirement if your earnings are continually being drained. While times may be tough economically, you also need to be realistic about your financial future. Continually supporting adult children who cannot stand on their own feet perpetuates the cycle of financial dependency.

ADVISOR PROFILE

Eric Jordaan

Crue Invest (Pty) Ltd

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