12 Jan 2021
We are all looking forward to the day when we can kill the alarm and sleep in for as long as we want. No more rushing or stuck in traffic. We want to travel and take up hobbies we never had time for, spend more time with family or perhaps even start a small business.
But the burning question is whether we are ready for it. Can we afford to live this dream retirement we always dreamed of? There are certain warning signs that might alert us that we are not prepared financially for what’s to come.
• Are you battling to pay your current bills?
When you retire, it is projected that you would need about 75% of your current salary to be comfortable. If you are battling to get by with your current pay-check, then the chances that you will manage in retirement are slim. You need to cut down on your expenses and prioritise.
Create a retirement budget. Which monthly expenses will fall away or decrease? Some might increase like health or travel costs. Don’t forget your taxes. Once you know what your expenses will be, then you can start cutting down or saving more. This needs to be done a few years prior to retirement so you have time to adjust your expenses.
• Do you have high debt?
High debt is the enemy of retirement. Get a plan in place to pay off your debt before you retire. The ideal situation is to have all credit cards, car payments and mortgages paid off by the time you retire.
• No major expense plans in place
Have you thought about major expenses that need to be completed before retirement? You might not be able to afford them when retirement hits. These include rethatching/waterproofing a roof, buying a new car, repaving a driveway, replacing fencing.
• Not sure what your government pension will be
Most of us would have private and company pension plans in place for retirement, but don’t disregard your old age pension from the government. Find out how much you will receive and from when you can claim. This little extra will be a nice lifeboat at retirement.
• No monthly retirement budgets
When you retire, the pay checks end. Make sure you have calculated what your monthly expenses will be so you know how much money you will need to live and plan accordingly.
• No idea what your income will be
If you have no idea what your pension would be then how can you plan? Will your pension last as long as your retirement? Remember people are living longer and you might have to stretch your retirement income over 30 years or more. Don’t forget to factor in inflation. By the time you reach 90, your expenses could have doubled.
• You haven’t rebalanced your portfolio
As you get closer to retirement, you need to rebalance your portfolio yearly to preserve wealth and focus on income generation. Your financial adviser will assist with this, in fact, you should have an adviser appointed to look after your money from the day you stary making contributions towards a pension plan.
• Showing signs of anxiety and stress about retirement
If you are anxious about retirement or are dreading it, then you haven’t thought about the kind of retirement you want. It is important to plan how you want to spend your time. Will you start a small business or invest in your hobbies or travel frequently? Perhaps you want to continue working for a few more years. Once you have answered these questions, then it should put your mind to rest about your retirement future.*
If all this seems daunting, then your deVere Acuma adviser will assist with all these aspects of retirement and get a plan in place that suits your circumstances. [email protected]
Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere Acuma adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.