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How to ensure that you don’t outlive your savings

Five steps that will help you plan towards a safe, secure retirement.
Image: Shutterstock

Did you know that it’s possible that you could live for another 30 years after you retire. How do you ensure that you will live out your golden years without having to worry about finances?

The earlier you start planning for your retirement, the better. It’s a scary thought for any 22-year-old that their retirement may be almost as long as the number of years that they will be working! But whether you are just starting out or you are close to retirement, you need to have a plan for what comes next.

There are five steps that everyone should take to build a solid retirement plan.

1. Understand your time horizon

Your current age and expected retirement age create the groundwork for an effective retirement plan. The longer the time between today and your retirement, the higher the level of risk your portfolio can withstand. If you’re young, you should probably have the majority of your retirement assets in higher risk investments. The older you are, the more your portfolio should start to focus on income and the preservation of capital. Your financial advisor will tailor this plan for you and review it regularly to keep you on track.

2. The power of compounding

Saving is like an acorn. It starts out small but with time, it will turn into an oak tree. You may think saving a little extra in your 20s won’t mean much, but the power of compounding will make it worth considerably more by the time you need it. If you move jobs, no matter how tempting, reinvest your company pension or provident fund benefit. Your financial advisor will action this for you and incorporate it into your overall retirement plan.

3. Overlap your retirement planning with an investment strategy

You should break up your investment planning into multiple components. For example, let’s say you want to retire to Hermanus in 10 years but you also need to fund your child’s university education. To deliver both you can overlap your retirement plan with an investment strategy. This would be divided into three periods: 10 years until retirement (contributions are still being made to your plan); saving and paying for university; and living in Hermanus (with regular withdrawals for living expenses). Your financial advisor will develop a multi-stage retirement plan that integrates these time horizons with the corresponding liquidity needs.

4. Balancing the longevity of your retirement portfolio

A key factor in the longevity of your retirement portfolio is your withdrawal rate so it’s critical that you have an accurate estimate of your expenses in retirement. Though most people need about 70% of their pre-retirement spend, this is unique to individuals and their circumstances. Understate your expenses and you will likely outlive your portfolio. Overstate your expenses and you can risk not living the lifestyle you want. Accurate retirement goals help as more spending in the future requires additional savings today.

5. Know what you have and what it gets you

Everyone needs to know what assets and liabilities they have, how these are likely to change and how each contributes to the achievement of your goals. If you have never taken stock of where you are with your post-retirement lifestyle, it’s time to meet with a financial advisor to develop a road map for financial success. This will create realistic expectations about your post-retirement lifestyle and your current savings behaviou.

One of the most challenging aspects of creating a sustainable retirement plan is striking a balance between realistic return expectations and a desired standard of living. The best solution is to work with a financial advisor to develop a flexible, personalised plan that evolves with your changing life circumstances but remains focused on your retirement objectives.

Paula Walker (CA)SA is an advisory partner at Consolidated Wealth.



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Would say just now the best way is to “stack satoshis” .Certainly anything can fail but it is probably best asymmetric bet to acrue a “bit” of a hedge against future dire straits ( without enriching “trusted third parties” ) One year ago eg you could get 100K Satoshis for ZAR100. Currently? It will cost you just about ZAR1000 for 100 000 Satoshis.Put another way 1 rand will buy you 100 Satoshis . Satoshi-cent parity is here. Soon it will be satoshi-rand parity. Stop looking at buying a whole bitcoin….that is quite beyond the reach of Mr Average.(currently about 1 million ZAR) However using a fixed monthly ZAR allocation eg 500 rand and buy Satoshis is feasible.And if you buy less and less satoshis for that number it is a good sign, your stash is growing. Never too late

Seriously? What exactly can you buy with a satoshi? A bread? Petrol? Are you seriously suggesting that you “invest” in something which is not a currency, backed by nothing, and which is subject to enormous volatility?

For a satoshi now….zilch. Like bitcoin circa 2010 .Reached parity with USD and then….Now worth 60K USD , 1 million rand soon. Think you may just be able to buy something with it.Read up, wise up , loosen up –I cant do your work for you. Otherwise just stick to MMT, fiat and so forth. May just be that I am wrong, may just be I am right

Realize that very, very few people are able to save enough, especially in SA, to live off their savings. This is due to many factors, including execrable investment returns on the JSE, Regulation 28 and administered prices and taxes rising far quicker than you can ever hope to equal with your investments.

If you are healthy enough, make running a business or doing consulting work part of your retirement plan. Don’t retire, in other words. Sitting at home doing nothing hastens your death by several years in any case. Keep busy for as long as you can.

Consult a financial advisor… consult a financial advisor… consult a financial advisor — this is a poorly disguised advertorial for financial advisors (and Consolidated Wealth). My advice is that you don’t need a financial advisor (who will charge fees and often give bad advice that maximizes their fees) to accumulate the assets you need. Common sense and willingness to spend a modicum of time to educate yourself is enough.

#6 Stop being like the average South African idiot who drives a car which he actually can’t afford just to keep up with his friends.

“…to keep up with his friends”… (who also can’t afford it).

I agree….I was a Financial Advisor for 30 years and through the years many of my buisiness owner clients would rather buy a new car and one for the Mrs. than focus seriously on retirement savings.

One can buy a hell of a lot of Uber trips for the price of a new car.

Potential solutions:
-save more
-spend less
-live shorter

Last one cannot be too hard?

As importantly get every cent out of this country, lease cars, rent property and get a foreign passport and qualification.

Otherwise the frog-boiling rubbish and his accomplices will steal everything!

Exactly. Never going to outlive my savings, as that decision is entirely up to me. And Switzerland has an excellent facility.

Firstly, I think that the title is wrong

A guy that I know, just before he retired he realised that his life savings were not enough to see him through retirement so he started smoking in order to shorten his life and match his savings

At the current price and tax on fags, your savings will shrink quicker than your life!!

End of comments.





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