Saving for your retirement should start from your first paycheck. Below are key questions you need to ask yourself when looking at your retirement plan:
Young as we are, we need to be aware of the fact that life doesn’t stop when we retire. This is the reason it is important to look at your retirement plan and decide at what age you would like to retire to ensure that you have contributed enough to live a comfortable life post-retirement. While retirement plans may change overtime, starting your retirement journey early can offer you the flexibility of adjusting your plan without having to feel too much pressure of any financial burden this may bring about in terms of one’s contributions on a monthly or annual basis.
We unpack four questions you need to ask yourself when looking at your retirement plan:
Why do you need a retirement plan? Life goals don’t stop when you go on retirement. You may have ambitions to travel or invest in a non-profit organisation that is close to your heart. All this will require some form of finance to fulfil it, therefore you need to ensure that you have sufficient income to be able to pursue your goals. Key will be ensuring that you make enough contributions so that you are able to reach your retirement goals.
At what age would you like to retire? Decide on what age you would like to retire as well as what you would like to do once you are in retirement. Once you have decided, work out how much you will need and start saving towards that goal. As the cost of living increases, you will need to evaluate your retirement plan to ensure that you are still on track to have a comfortable retirement.
What are your needs? It is worth noting that even in retirement, your day to day expenses such as food, transportation and access to information such as data and internet will continue. Therefore, it is advisable to settle all your debts before you go to retirement. Moreover, you need to be aware of unexpected expenses such as medical bills and take those into account on your retirement plan.
What lifestyle do you want once retired? Your contributions should factor in the lifestyle you want to lead in retirement. For example, if you want to pursue entrepreneurship or side hustle once retired, you need to start looking at ways on how you can fund your entrepreneurial journey.
Looking at your current overall needs as well as what you would like to do in retirement is a great way of establishing how much you need to contribute monthly to live a comfortable retirement. It is advisable for consumers to continuously evaluate their retirement plans to ensure that they meet their long-term goals.
Words: Preenay Sathu, Wealth Manager at FNB Wealth and Investments
Source: Supplied, FNB