Hard questions you should ask about retirement

Is financial independence really your life goal or is your fundamental purpose about more than just money? Using the appropriate tools, you can assess your choices and map out various scenarios.

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The concept of retirement has evolved over the years. Life expectancy is on the rise, and you will probably live longer than expected, which means that your financial plan may not account for those extra years. Whatever path you choose later in life, a financial planner can assist you with safeguarding your retirement income against longevity, tax and inflation, while also looking at your behavioural needs.

Why is it so difficult to commit to a retirement plan?

As far as our brains are concerned, the future is more uncertain than the present, and the further away from today that future feels, the harder it is to imagine. This causes an “empathy gap”, where we perceive our future selves as less important than who we are now and underestimate the detrimental effects our choices will have later in life.

According to the 2021 Old Mutual Savings & Investment Monitor, nearly one-third of working South Africans (27%) have no pension plan, provident fund or retirement annuity. While this may be a concerning number, our seeming inability to save for our retirement shouldn’t come as a complete surprise.

What is the key mindset for successful retirement planning?

Instead of saving to some end point in formal employment, you need to plan on living a purposeful life that will evolve as you age. In other words, is financial independence really your life goal or is your fundamental purpose about more than just money? Maybe it’s more about a life purpose that your wealth will enable you to find in retirement. If what you do for a living is aligned with your purpose, retirement means something entirely different.

Maybe it’s more about a life purpose that your wealth will enable you to find in retirement. If what you do for a living is aligned with your purpose, retirement means something entirely different.

Where to start?

Planning for your lifestyle in retirement may seem daunting. Based on your vision for retirement, a professional financial planner can assist you in determining how much money you will need to set aside, and which investment vehicles are best for you.

Using the appropriate tools, you can assess your choices and map out various scenarios. This process begins with an in-depth conversation about your lifestyle goals, dreams and aspirations for retirement. Articulating your goals helps you quantify them to see how much you need to save and whether your goals are realistic.

Articulating your goals helps you quantify them to see how much you need to save and whether your goals are realistic.

Getting to your ideal planned destination may require some trade-offs – saving more now, reducing expenses later on, looking at a different personal investment target, or changing your goal. Each decision has some element of risk, and the right conversations with your financial planner will help you understand the risk you need to take to retire comfortably.

Looking at various scenarios allows you to have a clear picture of what your current situation looks like (if you do nothing) and compare it to a planned scenario that you and your financial planner have co-created.

Remember, it’s never too early or too late to start saving. Your actions now will ensure that your retirement years are both happy and rewarding.