Retirement Policies and Retirement Annuities

Early retirement extends the funding period and reduces saving time. Typically, aim for 70% of your pre-retirement income, accounting for rising costs like medical aid.
Preparing today ensures a comfortable, debt-free retirement tomorrow.

No one wants to work forever.
Most of us would, at some point, like to put our feet up, relax, and start indulging in some of the other more enjoyable aspects life has to offer – even if it is just sitting in front of the TV.

Although most people would like to retire early, you should consider that:

• The earlier you retire, the longer you’ll need to fund your retirement.
• Early retirement means the time you have to save is diminished (and so is the ability to generate growth on your savings).
• Large-scale retrenchments have resulted in many South Africans retiring early.

This depends on the needs different individuals have, but generally speaking:

• As a rule of thumb, you’ll need approximately 70% of your retirement income.
• Whilst some costs may no longer apply (commuting to work, work clothes, school fees) others may increase – such as medical aid, which is no longer subsidized but increasingly important as you get older.
• You should aim to be free of debt so that it doesn’t eat into your hard-earned capital.

Many people assume that by simply contributing to a retirement scheme, their nest egg will one day automatically hatch and take flight. Unfortunately, the contributions may not be sufficient to generate enough wealth for a comfortable retirement, resulting in a retirement savings gap.

Bridging the savings gap: As hard as you work, your money needs to work harder. If, like most people, you find that contributing to the retirement fund where you work might not be enough, there are ways to grow your capital before you retire: Make additional contributions and invest in a retirement annuity.
If you’re looking to boost your retirement capital, you may want to consider an option like a Retirement Annuity suitable for those who are self-employed as well. The underlying investments in the Retirement Annuity are unit trusts and costs are kept to a minimum. A retirement annuity (RA) allows you to grow your retirement savings in a tax efficient manner. RA contributions are tax deductible within certain limits.

A robust investment strategy begins with comprehensive financial planning. This involves analysing your current financial situation, understanding your future goals, and planning the steps to bridge the gap between the two.

Contrary to popular belief, investing is not about having large sums of money to spare. Everyone can invest by setting aside a small amount each month to take advantage of compound interest. This is especially powerful when done early in life, turning even modest savings into significant wealth over time.

At The Art of Wealth, we’re committed to turning your dreams into reality. Investing is a different way of thinking about money. Instead of simply spending or saving what’s left over, investing focuses on using available revenue streams to generate new income opportunities or grow existing ones.

While saving is critical for short-term goals and an emergency fund, investing tends to offer higher returns, thus enabling you to achieve your long-term goals more effectively.