Retirement planning prevents financial burden on loved ones

The planning to retire comfortably begins now. Not tomorrow or next week. Now.

SA generally is not a saving country and the latest FNB retirement insights survey 2024 revealed the startling reality that almost 50% of the respondents don’t have a retirement plan.

Lack of savings only leads to the burden of the state and your loved ones.

“This lack of preparation for retirement isn’t just a personal financial risk, it’s also a potential crisis that could send shockwaves through their families and negatively impact future generations,” says head of product at FNB wealth and investments Samukelo Zwane.

“That’s because, without adequate retirement savings, individuals may find themselves relying heavily on their children and other family members for financial support, creating a severe strain that can prevent the ability of the next generation to prepare properly for their own retirement.

“This domino effect of financial burden is a growing concern in SA, but it’s not an inevitable fate. There are concrete steps that anyone, regardless of age or current financial status, can take to mitigate this risk and work towards a more secure retirement. By acting now, you can reduce the likelihood of becoming a financial burden on your loved ones in your golden years.”

Kananelo Matela, investment consultant at 10X Investments, says no matter how much you love your job, financial freedom should be your ultimate goal.

“For those unfamiliar with the term, financial freedom can best be understood as a state where individuals or households have enough financial resources to cover their living expenses without having to depend on work to maintain their standard of living,” says Matela.

“Most of us aim to have financial freedom by the time we hit retirement age when we need it most. But if you can achieve it before then, that’s even better. Suddenly, things like company downturns and retrenchment exercises become less of a worry. And if you feel like you need to take a mid-career sabbatical, you can.

“Financial freedom shouldn’t be seen as a pipe dream but as an attainable goal for all working people. As long as you’re realistic in your planning and understand what it takes to achieve your financial goals, financial freedom is entirely achievable,” he says. “Whether you reach it when you hit retirement age or even earlier, your future self will be grateful for the sacrifices you make today.” 

Ilse Smuts, business development head at FNB Cash Investments says the key to avoiding becoming a financial burden on your family in retirement is to take proactive steps towards financial independence starting now.

“No matter what age you are or where you are in your career today, every step you take towards financial security later in your life is an investment in your future and your family's peace of mind,” Smuts says.

Zwane shares steps you can take to safeguard your future and protect your family’s financial well-being:

Work out your retirement “magic numbers”: The first step towards a secure retirement is understanding exactly when you want to retire and how much money you will need to maintain your desired lifestyle. This involves carefully considering when you want to retire and what you’d like to be doing in your twilight years. Working out your magic number is crucial. It’s not just about maintaining your current standard of living but also accounting for potential increased healthcare costs and other retirement-specific expenses.

Grow your money wisely: Once you’ve determined your financial goals, it’s time to focus on growing your wealth. Smuts advises aiming for a balanced combination of short- and long-term savings and investment accounts. For short- to medium-term goals, consider options like notice deposit accounts, which enable more disciplined savings or fixed deposit accounts, which offer guaranteed returns and allow you to set the terms for accessing your money.

For long-term retirement planning and saving, she suggests products like a retirement annuity, which provides solid tax benefits and compound growth over time. Additionally, the tax-free savings account solution allows you to save up to R36,000 per tax year completely tax-free, maximising your returns and providing you with a useful cash buffer for expenses once you’ve retired.

Develop a long-term healthcare plan: As we age, healthcare costs increase significantly. Planning for these potential costs is essential to avoid burdening your family. Consider whether you have the resources to remain financially independent and pay for long-term medical costs and care if needed. This might involve downsizing your home and living costs in retirement, and setting aside a specific savings fund or ensuring you can afford to continue your medical aid premiums for healthcare expenses after retirement.

Establish and grow an emergency savings account: Unexpected expenses can quickly derail even the best-laid retirement plans. Smuts says starting an emergency savings account as soon as you can and then consistently contributing to it, can provide a crucial financial buffer. She highlights “the importance of balancing growth with access for an account like this, emphasising that you may have to sacrifice a little bit of the interest you’d get on an account like a fixed deposit so that you have immediate access to your money”. Savings accounts offers a flexible solution with immediate access to your funds, and it still provides a competitive interest rate so you can still grow your money over time”.

Create a debt elimination strategy: Entering retirement debt-free is one of the most effective ways to ensure financial independence and avoid burdening your family. “Carrying debt into retirement can significantly reduce your disposable income and put unnecessary strain on your finances hence we strongly advise debt repayment as part of any retirement plan. Start by listing all your debts and their interest rates, then focus on paying off high-interest debts first while maintaining minimum payments on others. Or you can also consider speaking to your bank about consolidating debts into a single loan with a low interest rate,” says Zwane.

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