Ever heard about the Financially Independent, Retire Early (Fire) community? These are mostly millennials in their thirties who are saving as much as they can so that they can retire early, giving them the financial freedom to spend the rest of their lives doing what they love most, whether it’s travelling, working on a passion project or volunteering.
For most people (even millennials), retiring early – even before 60, never mind 50 – is a pipe dream. According to the 10X Investments Retirement Reality Report 2020, only 44% of people between the ages of 25 and 34 expect to be able to retire by the age of 60. Furthermore, a whopping 62% of all respondents who left corporate retirement funds in the previous year had cashed in their retirement savings, which is one of the biggest retirement saving mistakes and suggests no plan to retire in the near future.
But it doesn’t have to be that way. By starting to save early, remaining disciplined and spending wisely, the idea of retiring well ahead of the typical age may not be all that far-fetched. No matter your current age or circumstances, you can still give your retirement savings a boost.
Take the quiz below to find your retirement goal personality; then read on for some top tips.
1. On hearing that you have been awarded a salary increase, you:
a) Can’t wait to spend it on those new kicks you’ve been eyeing.
b) Breathe a sigh of relief. Now you can finally make a dent in your credit card balance.
c) Look forward to adding to your monthly contribution to your retirement savings.
2. You think the difference between a retirement annuity (RA) and a pension fund is:
a) No clue, but I need to worry about that only when I’m in my 60s, right?
b) Don’t really know, but it shouldn’t matter as long as I have one of them, should it?
c) A pension fund is what I have at the office, which is supplemented by the savings I make into my RA, my individual policy.
3. You live by the saying…
a) Yolo — you only live once!
b) The secret to happiness is accepting your lot in life.
c) The best way to take care of your future is to plan and prepare in the present.
4. To you, a budget is…
a) Budget? What’s that?
b) A nice-to-have, something to look at on the occasional quiet Saturday.
c) An essential part of your roadmap to financial freedom.
5. You’ve landed your dream job, it’s time to move on. What about the money you have saved in your current employer’s pension fund?
a) Cash out! You need a new wardrobe for your new gig.
b) Take half the money to pay debts and have some fun, and move the rest to the new company’s pension fund.
c) Do some research and either move the whole balance to the new company’s fund or to a carefully selected low-cost preservation fund.
If you scored mostly As (Naked Nick)
Nick (like too many South Africans) believes retirement is something to worry about when you’re retired. In fact, 49% of South Africans surveyed for the 10X Investments Retirement Reality Report 2020 said they didn’t have a retirement plan (with women faring worse than men, in general).
Imagine you retire at the decent age of 55 or even 60; how will you support yourself for the next 10, 20, 30 years? Think about the type of lifestyle you want to have in retirement and you will realise pretty quickly that you should start putting something aside now.
The good news is that starting early and investing diligently and sensibly means the growth on your savings will make up a big part of your total. In other words, let your money do some of the work for you. Start by making a plan using a retirement savings calculator.
Mostly Bs (Middling Michelle)
You know you need to save for retirement, you even have a savings fund in place … but you are not entirely sure about it/can’t really be bothered.
The Middling Ms are not necessarily that much better off than Naked Nik. They have a false sense of security that everything is going to be okay because their company pension fund administrator or their HR team is going to make sure it is so.
If this is you, think about who needs to do what to make sure you are on track to be able to pay your bills in retirement, never mind travelling internationally (and dressing the part).
If you don’t have a retirement savings plan, create one using a retirement savings calculator. If you do have a retirement savings plan, revisit it and check that it is still fit for purpose.
Mostly Cs (Crafty Chris)
Wow, you are on fire! You have done your homework, you know about resisting temptation when it matters, and are setting yourself up to say goodbye to the working world on your own terms. You could very well be on track to join the Fire community, but don’t be in too much of a rush to exit the world of work.
You can withdraw from your retirement annuity only after age 55. Also, the earlier you retire the longer your savings will have to last you. For some of us, the idea of being a retiree for 50 years is just as daunting as being a worker for 40.
Also, as Andre Tuck, Senior Investments Consultant at 10X Investments, says: “If you choose to work for another two, three, five years, or more, you will give yourself those years back threefold. You’ll have extra years to save, your investment has more time to grow, and you have another few years where you’re not drawing down on your savings.”
This article was supplied by 10X Investments. It should be regarded as general information only; it is not intended as nor does it constitute financial advice.