You often hear the phrase, "it's never too late", but with retirement the earlier you start to plan the better. This is one area where you definitely can be too late.
Start saving for retirement when you receive your first salary cheque from your very first job. Some think this sounds crazy because people in their early twenties often cannot even envisage what retirement is all about.
The younger you are, the further away retirement seems, but the power of compound interest works wonders.
This means you earn interest on the amount you have invested as well as earning interest on the interest you have already earned.
Many of us have difficulty thinking about the long-term and preparing for it. Thinking in advance and acting on these thoughts are the keys to being ready for the future when it turns into the present.
Some of the important questions are:
l When should I start saving for retirement?
l What are my goals before and during retirement?
l How much will I need for my retirement to live comfortably?
l What do I need to do?
l What expenses will I have once I have retired?
Consider 12 steps to prepare for a comfortable retirement.
Step 1: Recognise that retirement is more than simply choosing a date to stop working.
Step 2: Determine what it will take and how to get there.
Step 3: Know how your job contributes to your retirement needs.
Step 4: Recognise when to use tax-deferred savings and when not to.
Step 5: Invest for the future and also into the future.
Step 6: Be aware of the effect of working during retirement.
Step 7: Recognise that your home is a lifestyle asset and is unlikely to produce income.
Step 8: Remember that taxes must continue to be paid when you retire.
Step 9: Determine how you will receive retirement benefits.
Step 10: Make sure your hard-earned wealth stays in the family.
Step 11: Examine your insurance needs, particularly your medical cover.
What about step 12? This is the most important one, the step that if forgotten, condemns us to a life of never-ending work. Here it is:
Step 12: When all else fails, repeat steps one to 11.
Why? Because plans are only plans and outside influences, over which we have no control, can destroy them.
The first 11 steps deal primarily with money issues, but they fail to deal with aspects of retired life that have little to do with finances.
Life expectancy is increasing, so after spending a lifetime working hard for our money, retirement is a time when we want our money to work for us.
lBryan Hirsch is chief executive of Pioneer Financial Planning.
For more information visit www.pioneer.co.za or e-mail firstname.lastname@example.org