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Here are some practical tips on how to save for retirement.
Everyone wants to retire in comfort, but few are able to because they didn't start planning early in their career nor did they stick to their plan.
Invariably, when people leave companies they use the money saved in their retirement funds for a whole host of reasons.
Planning for retirement is a long-term event and planning should begin 30 to 45 years before retirement in order to have enough income to see you through retirement.
To calculate what you will need at retirement, you need to establish a budget, taking into account that many of your current expenses will not apply at retirement.
Ideally your bond, car etc should be paid off before you retire. Next, calculate what your expected income will be at retirement, taking into account all your investments, retirement policies etc.
This will leave you with a shortfall, which is where you need to concentrate on putting those extra funds.
When saving for retirement, one needs to take a long-term view and concentrate on investing in growth assets to keep abreast of inflation and taxation.
The question I am always asked is: "What is the best way of saving for retirement?"
There are many ways, but one of the more successful and proven methods is buying a retirement annuity.
A retirement annuity is an individual pension fund which allows self-employed people to enjoy the same tax benefits when saving for retirement as those who belong to pension or provident funds.
It also allows people who belong to company retirement funds to increase their savings for retirement.
Subject to limits, self- employed people can contribute up to 15percent of their taxable income which, if paid before the 29 February this year, will be fully deductible from the whole year's earnings.
Those people who are in what is known as Retirement Funded Employment can contribute R1750 as a minimum.
The end of the tax year is this Friday which gives potential savers a few more days to investigate and understand this method of saving for retirement.
Irrespective of your age, it is critical that the financial exercise is done to calculate what you will need at retirement and how much tax relief you can get by contributing to your retirement annuity.
If there is still a shortfall, there are other methods of saving which I will discuss in future articles.