VARIOUS financial institutions have all recently produced retirement reports once again highlighting the importance of saving for your retirement years.

VARIOUS financial institutions have all recently produced retirement reports once again highlighting the importance of saving for your retirement years.

The population can be divided into two categories - those who are working and contributing to a retirement fund and those who are unemployed, or working but do not contribute to a retirement fund.

The statistics are alarming regarding how few will be able to retire independently, but what's even more daunting is that even those contributing cannot expect to receive more than about 26percent of their final salary as a pension.

This low number reflects how badly prepared so many are when it comes to understanding that it's not just about answering the question: Are you saving for retirement?, but to understand what and how you are investing for retirement.

Even more important is to find out what the value of your retirement funds are likely to be, using a reasonable investment return. This figure must then be compared with your income requirements at retirement to assess whether you are saving sufficiently or not.

The only way to ensure financial peace of mind at retirement is to set aside money during your working lifetime and to make additional investments, which will achieve your target at retirement. To attain financial security, you need to make certain that you are debt free.

There are many things to consider when planning for retirement but, most essential is the consideration of your healthcare and life insurance programmes. Statistics show that as much as 70percent of your total life expenses might go to medical care in your last few years.

So it is vital that provision is made to have medical aid cover or at least a hospital plan in place at retirement. If you do not prepare for this cover, whatever savings you have could well be depleted by a major illness requiring surgery and hospitalisation.

Most employees working for a company will have a multiple of their salary as life cover prior to retirement. For example, if someone earns R100000 per annum, they may have four times their salary as life cover equalling R400000.

At retirement this life cover will fall away, but some schemes give members the option of taking up the life cover. The cost of this cover would be the same as any individual of the same age buying the cover, the advantage being that the member would not have to undergo any medicals other than perhaps an Aids test.

The disadvantage is that the member would have to pay for this cover from the age of his or her retirement. It is notable that few retiring members of group life funds exercise this option. The probable reason being that the cost of buying an often substantial amount of life cover is prohibitive.

So to fund healthcare and life cover (pension), provision should be made to set aside a few hundred rands every month. This will create a lump sum at retirement, which in turn will provide income to pay for these expenses.

By planning well in advance, you will certainly be able to retire in the knowledge that two of the most important and costly areas have been well taken care of.

l The writer is financial adviser of Bryan Hirsch Colley and Associates. Email bryanh@bhca.co.za or call 011-880-4888.