Enjoy a long, carefree retirement by being well prepared for it

Thanks to the advances of medical science, longevity has become a real prospect for many of us. If you’re financially well prepared, it can be a real bonus and a cause for celebration. But the inconvenient truth is that it takes sound personal finances to grow old happily and healthily.

South Africans tend to be stubborn optimists. Our urge to be positive is so strong that we will call a glass half full long after the glass has been spilt, broken or stolen.

But even the most optimistic South Africans have had to face up to the financial realities of 2022.

According to Marius Pretorius, head of marketing for retail savings and income at Old Mutual, it’s clear that Covid and the weak economy have magnified vulnerabilities in our society. “A broad range of people have been affected and are feeling very anxious about their finances, and especially their retirement,” he says.

Last year’s 10X Retirement Reality Report indicated that 71% of respondents had no retirement savings fund at all, while the 2021 Old Mutual Savings & Investment Monitor (OMSIM) highlighted that in challenging times, it’s not enough to have good intentions. Only 6% of those surveyed said they had a retirement plan that they were actually sticking to.  

However, about 87% of those surveyed by OMSIM last year said they had changed the way they manage their finances. “It’s clear that many South Africans have become acutely aware of the importance of planning properly for the future,” says Pretorius.

Here, he shares some valuable tips that’ll help you do just that: 

1. Take advantage of tax breaks and benefits

Consider reducing your annual tax liability to the SA Revenue Service (Sars).

You can do this by making use of the concession that allows taxpayers in SA an annual tax deduction of up to 27.5% of their taxable income or remuneration, whichever is higher, on contributions to retirement funds. 

This concession is limited to a total amount of R350,000 per tax year.

To benefit from this concession for the 2021/2022 financial year, discuss the implications of increasing your contributions to your company retirement fund or a retirement annuity fund before the end of February with your financial adviser.   

Also consider taking advantage of a tax-free savings account (TFSA), which allows you to save up to R36,000 a tax year, or R500,000 in total over your lifetime, without paying tax on the income or growth of the investment.

2. Stay calm, don’t panic

For peace of mind, consult an accredited financial adviser or planner, ideally one supported and backed by a reputable leader in the financial services industry. 

They can do a thorough financial analysis and help you draw up, and annually review, a sound personal financial plan.

Advisers are able to guide you on how much you need to save for retirement and how to manage your finances in the most tax-efficient way.

3. Use every windfall wisely

Be on the lookout for opportunities to save and invest. For example, if you qualify for a tax refund from Sars, consider making a lump sum injection into a tax-free savings plan or unit trust investment.

4. Encourage your family to function as a team 

Discuss your priorities and action plan with your family to get their full buy-in and support. Make sure everyone understands the priorities and what the family can and can’t afford. Together, find ways to stretch and grow your money.

5. Start saving as soon as possible for as long as possible

This may be stating the obvious, but the sooner and longer you save and invest for your retirement, the better. 

One of the biggest challenges facing many consumers is how to balance living comfortably in the present with delaying gratification so that your retirement years will be financially carefree — even if you live well beyond your 100th birthday.

6. Expand your knowledge

The financial world is undergoing immense shifts, with new financial concepts and products popping up like mushrooms every day. Be open to new ideas, but avoid making rash decisions, no matter how tempting the “mushrooms” are.  Do your homework first. 

For more information, please speak to your financial adviser or call 086-060-6060 or click here to learn more about saving for retirement. 

This article was paid for by Old Mutual. 

^{Old Mutual Life Assurance Company (SA) Ltd is a licensed FSP and life insurer.}