You won’t have enough money to retire.
I know I sound like the harbinger of doom, but it’s a reality that you and most South Africans need to face up to.
Now you might be asking, why am I saying this about you? Well, I am only looking at the statistics.
The Financial Planning Institute of South Africa says less than a quarter of South Africans can afford to retire. If you think that’s a disturbing statistic, consider that it gets even worse when you look at statistics from the World Bank. It reports that only about 6% of South Africans can maintain their standard of living in retirement.
The stats don’t stop there…
Sanlam’s benchmark survey of the retirement fund industry shows that only 2 out of every ten retirement fund members know what their retirement target is.
The good news for you is, because you’re reading this, all is not lost. There are things you can do right now to get ready for your retirement. But before I show you what you should be doing, I need to show you why it’s so important to start taking your retirement planning more seriously.
The best way I can do this is to show you…
Retirement Failure One: You don’t know how much you need for retirement
How much money do you need for your retirement? If your answer is, “I don’t know”, then you need to keep reading. How can you plan for retirement, if you don’t know what your retirement target is?
Francois Joubert, Editor of Red Hot Penny Shares and one of the key speakers at FSP Invest’s Symposium for 2016 says, “The first step to planning for a wealthy retirement is knowing how much money you need to generate in the next 5, 10 or 15 years. Once you know this number, you can start planning for the lifestyle you want, not the lifestyle you’ll settle for.”
At FSPInvest.co.za, we want to see you achieve the retirement of your dreams. So we’ve created a FREE Retirement Calculator that you can download to find out if you’re on the right financial track to live the retirement you’ve always dreamed of.
Retirement Failure Two: You’re relying on one income to save and invest – It’s not enough
The days of working one job to make money have gone. If you want to become wealthy and I mean, truly wealthy by the time you retire, relying on one source of income is just not going to cut it.
Now, I can already hear you saying, “But I only have enough time for one job. How can I earn more money?”
Here’s the thing, too many South Africans don’t realise that you don’t need another job to earn a second or third income stream. You just need to make smarter investment decisions with your money.
When you invest in dividend paying shares, you start building multiple streams of income. This is the type of income that you don’t have to work for. It’s passive income that flows into your investment account on a regular basis.
Joshua Benton, Editor of Real Wealth says, “When you invest in dividend paying shares, you don’t have to work to earn more money. You simply wait for the company’s dividend once or twice a year and that automatically grows your investment portfolio.”
Joshua recently published a report that shows you seven of the best dividend paying shares on the JSE today. Find out how you can start building a solid passive income with The Endless “Paycheque Portfolio”, now.
Retirement Failure Three: Your financial advisor is your worst enemy and you don’t even know it
I’ve spent more than 12 years in the financial services industry. In all that time, I’ve met hundreds of financial advisors. Out of all of these, I would only trust my money with three of them. The reason I say this is that most financial advisors only have their best interest at heart. They want to collect commissions on selling you investment products that don’t meet your retirement goals.
You probably already have a financial advisor that has shown you fancy spreadsheets predicting the millions you’ll have in the bank when you retire. The things is that spread sheet did not take future economic calamities into consideration.
Just look at what happened to investment markets over the last year. Here at home, the rand tanked because of various local and international political reasons. Some of these include the changing of finance ministers that saw the rand plummet, rumours about the Gupta family buying out key positions in the financial industry that shook investor confidence and of course, Brexit that caused a wave of uncertainty across international markets.
It’s not good enough for you to give your money over to a financial planner and trust him to deliver excellent returns. He will leave your money in mediocre performing funds as long as you allow him too.
You need to play an active role in your investments and if your financial advisor doesn’t like it, find a financial advisor that will.
Retirement Failure Four: You don’t know enough about investing to make the right decisions
Too many investors make decisions based on what they see on the news or hear from their friends. When you’re planning for your retirement, this is the last place you should be looking for your investment information.
Now, you might think that you need to spend four years studying a financial or economics degree to understand how to invest for your retirement. But that’s certainly not viable.
Joshua says, “Warren Buffet claims to read two books a day. I have tried to challenge him in that respect. So I read voraciously, not only books, but technical investment manuals, annual reports, magazines and investment strategies. I firmly believe that knowledge of the investment markets, global economies and investment strategies is what makes a great investor.”
If you’re new to the investment markets and need to improve your knowledge of investing, then I urge you to read Fear, Greed and The Stock Market. In fact, if your family and friends are interested in buying their first share, I suggest they try this book.
It shows you everything you need to know about investing – From how to formulate a winning investment strategy to protecting yourself from taking losses… It’s essential reading for anyone nearing retirement that needs to understand how the investment markets work.
Retirement Failure Five: You don’t know how to use the retirement reforms to your advantage
The retirement reforms are a hot topic of conversation right now. New reforms have been introduced to help you protect your retirement savings, reduce the amount of tax you pay and give you new investment vehicles that you can use to grow your retirement nest egg.
Guy Algeo, the head of Prodigy Asset Management says, “One of the key Retirement Reform factors is the increase in life expectancy. It’s quite astonishing to think that life expectancy has effectively doubled in the last century! This is a global phenomenon driven by advances in medicine and improved quality of life. But, the impact of the increase in life expectancy on those nearing retirement is concerning.”
The longer you live, the more money you’ll need. You see, the dynamics of four living generations of family life will create new demands on social culture. And this creates massive pressure on the social benefit systems in developed markets. Simply, governments don’t expect to support twice as many people for twice the length of time.
Guy will speak about retirement reform at the FSP Invest Symposium for 2016. He will help you to plan your investment goals to live the retirement you want.
Retirement Failure Six: Inflation is a reality – You’re investing under harsh conditions
When consumer prices consistently increase, it devalues the amount of rand in your bank account. That means that you can buy far less with R100 ten years from now than you can with a R100 today. Inflation is a serious problem in South Africa. The cost of electricity, petrol, healthcare and food rises steadily every year. Even people earning a steady monthly salary are struggling to keep up under these economic conditions.
South Africa’s annual inflation rate is at around 5% to 6% right now. But it is important to note that as a pensioner or a retiree, inflation is one of the biggest threats you need to fight to live a comfortable retirement.
People that earn a regular salary still have the benefit of receiving an annual increase every year. That means the amount of money you earn increases steadily and helps to fight inflation. When you retire, you don’t have the luxury of increasing the amount of money you earn. Your income is fixed while inflation rises consistently.
The best way to overcome this problem is to start your retirement planning as early as possible. The longer you are invested, the more money you’ll have in your golden years. You need a portfolio that is well protected from violent swings in the market.
The shares you invest in should help you fight off inflation and most importantly, you should still receive exceptional investment profits year in and year out.
Retirement Failure Seven: You keep paying for your children – Even when they out of the house
Children are not cheap. Education, food, clothes and entertainment are just some f the ways children can tap into your retirement savings. When you are nearing retirement it is important to discuss your financial situation with your children so that they understand you can no longer offer them the financial support they are used to.
Retirement is the time that you need to focus on yourself and your children need to understand this. It’s not always easy to cut them off. So take a gradual approach to cutting those aprons strings. The best way to do this is to start at least ten years before you retire. Slowly wean your children off and encourage them to start investing, saving and being more careful with their money. If you don’t, and you hit retirement, you’ll face serious financial problems if you’re still bailing your children out of financial challenges.
Retirement Failure Eight: Pay off your debts debt collectors will come knocking
Taking debt into retirement can add unnecessary financial pressure. So, make sure that you pay off your bond, your car and all your credit cards at least five years before you retire. This will with free up a large chunk of your income. Instead of spending this income, save it, invest it and use it to fund your retirement.
Don’t try to impress your friends by constantly buying new things like cars. These are debts that you don’t need in your retirement. So hold on to your car as long as possible. Once it’s paid off all you need to worry about is your insurance payments. This extra income will make a significant difference in your retirement planning.
Now that you understand some of the biggest retirement failures threatening your income, you can take the right steps to make sure that you live the retirement of your dreams. Remember, this is your time to take a break from the hustle and bustle of life. It’s your opportunity to live life free of worry, stress and most importantly, reporting to a boss.
The best way to live the retirement of your dreams in the face of a looming recession
With the threat of a recession on our doorstep, the next five to ten years are going to be challenging. That’s why the FSPInvest.co.za team of investment experts want to show you how to protect your wealth and prosper in the coming years.
We’ve brought the world’s top investment minds together to show you exactly how to invest your money for maximum success. This is your opportunity to meet these investment experts in person and rub shoulders with superior international financial analysts.
You’ll hear the type of investment and wealth building ideas that not many investors are privy too. You’ll gain a superior advantage with the most profitable and actionable investment ideas in the market today.
To give your retirement the best chance of success, simply go here.
Let’s build your wealth together,
Contributing Editor, Real Wealth
AUTHOR: AIDEN SOOKDIN