THE Government last week issued a list of 11,000 whose pension money had been remitted to their bank accounts. What the list does not spell out is the horror stories regarding the process (including trips and time spent chasing the money) that precedes the final payment.
It is not uncommon to hear jokes that you are very likely to starve to death if you rely on Government for your retirement plans given the duration it takes to process the money.
The pensioners’ experience, in addition to the Government announcement to reduce retirement age earlier in the year, is food for thought.
Irrespective of the demerits and merits of government’s decision, the message should be clear for everyone earning an income. It is no longer feasible to depend solely on government or your employer for retirement.
We have heard excuses that demands of everyday life get in the way of retirement planning.
But relegating retirement planning to the last item on your priority list is a risk you cannot afford to make. Your retirement plans should be at the forefront as soon as you start earning an income. This should entail planning for creating new assets or using the available assets to achieve your retirement goals.
There are several options to consider when planning for retirement. These include assessing your current net worth.
This enables one estimate the gap between current assets and what it should take to match them to retirement needs.
The question of amount needed to bankroll your lifestyle needs during retirement is debatable. Some have suggested 80% of current annual income.
Upon assessing your current lifestyle, it is crucial to remember that the older you get, the more you need to plan for medical expenses.
Given the rising cost of living, it is advisable to plan for more income streams, less expenses and how you can grow your present or planned investments.
The skills set needed to be innovative regarding increasing your capacity to earn is important to take your retirement plan forward.
Do not forget that enhancing your net worth is different from aiming for a high income.
Unless you have prudent money management practices, your high income will be squandered. It is important to focus on what you keep before you even embark on household expenditure.
This will allow you not only to plan for daily expenses but also enable you set aside extra income for investment and future needs.
The plan should not only have specific milestones but it should also suit your financial situation. For example, if you keep your expenses low, but are barely making ends meet, it doesn’t make sense to starve. You should be working towards increasing your income source instead.
Further more, the choice of assets for investment are driven by ones level of finances, knowledge of asset class and the return on investment and impact of inflation. You should make a distinction on whether you are investing for capital gains or cash flow.
If you put money in starting a business, you should have an idea about your return on this investment and how long it will take you to recoup your initial investment.
An informed investor who has built up financial literacy skills is not vulnerable to get-rich-quick schemes or deals that promise super normal returns. Whatever investment choice you make, you have to be aware that there is an opportunity cost.
As it is, an investor should know that wealth creation is not an overnight success but something is done over a period of time that takes investment in knowledge and a lot of perseverance.
It takes a lot of work and passion to become a seasoned investor or businessperson.
Having the skills to secure, protect and accumulate wealth that will cater for your daily and future needs take time to build and the responsibility to achieve that lies with you. Forget the entitlement mentality that your government or company or anyone has to take care of your retirement.
Any available retirement savings should only supplement your efforts.
