The number one conversation to have around your finances this year

The number one conversation to have around your finances this year

For many of us, the first conversation any one has with us about our financial planning is around retirement. Either retirement is too close and is a tad on the stressful side to chat about (particularly if we’re a little behind in our investment strategy) or it’s just far enough away for us not to take it seriously.

This blog has been written as a conversation sparker for you, your family, friends and colleagues. Stats show us that over 90% of South Africans are not prepared for retirement - which means we have to be having better conversations around retirement.

Hopefully these thoughts will help!

Do you feel you’re 5-10 years away from retiring?
Are you aware of what type of annuity you currently have? Many people in this stage of life have had an investment vehicle in place for so long that it’s possible that they haven’t assessed how efficient it will be for their current situation.

Statistics from the Association of Savings and Investments South Africa (Asisa) show a whopping 92 percent of retirees currently invest in living annuities instead of guaranteed annuities because it allows for ‘leftover’ retirement money to go to loved ones after the client passes away.

The rising cost of living means that these living annuities are far more likely to run out of money before the client runs out of lifespan. Chat to your planner today about what type of annuity you have.

Do you feel you’re 10-20 years away from retiring?
This may be the time for a wake-up call – the vast majority of South Africans do not have enough money to retire with enough money for even a modest lifestyle for the rest of their lives. Just South Africa, a retirement income specialist, found that two-thirds of those surveyed in this category thought themselves to be good at financial planning but, in reality, less than a third had done any calculations about how much they would need annually in retirement. Start to think about your annual budget (not monthly) and see if it fits within your savings. A rough starting point would be to say that if, for example, you would need R250k per year, and have R3m invested; you have enough for about 12 years of retirement, not even taking escalation, losses or increased living expenses into account.

Do you feel you’re more than 20 years away from retiring?
The retirement game is changing and the conversations we initiate with our planner and friends need to change too. With increased longevity, changes in work culture and the ever-rising cost of living, 20-year retirements after 30-year careers are going the way of the dodo.

At this point in your life you need to think about how you would like your money to work for you should you wish to travel, study or retire. In the future, most people will either have a second, less-stressful career in their golden years (these people are currently known as ‘the silver surfers’) or they will work in cycles, taking shorter periods of some years off from working in more organic cycles, then going back to work or a different kind of work after a hiatus, rather than getting all their work and then all their resting done at once.

Either way, the world is changing at a faster pace than ever before and there are options available to virtually every scenario. Having constructive conversations about your expectations are powerful and helpful!

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