Want to give your future self something to celebrate? How about setting yourself up for a successful retirement?
Here, 10 South African retirement savers share their top tips on how you can save for your future.
Take charge of your money
“Take charge of your money, take control, and you will be surprised at how easy it is, and how much your money can work for you.” – Felicia Roman, 57
Felicia, who is semi-retired, says it is easy to feel overwhelmed when it comes to personal finances, especially regarding retirement saving, where the industry inundates consumers with so many choices. But, she says, your future is in your hands so don’t leave it up to others to decide for you.
“Get yourself educated and get more information – and the sooner the better.” – Keabetswe Mafafo, 31
Keabetswe, who wishes someone had advised her about retirement savings when she first started working, believes that time is your best friend when it comes to investing. The earlier you start investing, the more time your money has to grow. She’s referring to the magical power of compound interest where, over time, you earn interest on the interest you’ve already earned in a virtuous cycle of growth. Keabetswe believes that the biggest regret most investors face is not starting earlier. As the saying goes, the best time to start saving is when you receive your first pay cheque; the second-best time is now.
Ask questions, don’t trust blindly
“Get involved and make sure that you ask the right questions of your financial advisor.” – Youven Naicker, 38
Youven, who left the corporate world after 15 years to start his own business, warns that when it comes to the investment industry – which is characterised by lots of jargon and mumbo jumbo, hidden fees and complicated fine print – investors’ ignorance can easily be exploited.
Look at the long-term performance
“Don’t just jump around from one fund manager to another. Choose what you are comfortable with and look at the long-term performance.” – Sarah-Jane Wagg, 55
Sarah-Jane, who is semi-retired after working in the international finance industry for 35 years, says that although many asset managers have their day in the sun, very few are able to consistently deliver a strong return over many years.
Keep your fees low
When I first did the analysis and looked at the structure, especially the impact of the fees, it was actually a wake-up call to see how much money I would lose over the longer term.” – Ian Fordred, 65
Ian, who is comfortably retired, knows that fees are the single-most reliable predictor of an investment’s performance. He worries that ignoring this key factor puts many pensioners at risk of losing a massive chunk of their precious savings to fees. Someone drawing down a total of 5% of their capital each year and paying the industry average of 3% in fees is receiving only 40% of their earnings, meaning they are paying 60% of it away in fees. Moving to 10X Investments, which charges less than 1% plus VAT in fees, that person could continue to draw down 5% of their savings, but pay themselves a lot more (more than 80% of their drawdown!).
Capitalise on the tax benefits
“Get the tax benefit. If you’re not doing that, you’re crazy.” – Bob Bond, 62
Bob, who is in a position that he could retire at any time, says one of the great things about saving for retirement is the tax benefits. He’s referring to the tax incentives the government provides on saving for retirement. Money that you put into a retirement savings fund is deducted from your taxable income,so the more you save, the less tax you pay.
“Consistency in dedicating a portion of your salary into the retirement plan is also important. Try automating your savings by setting up a debit order that goes off on the first of each month.” – Linah Molele, 39
Mother-of-two Linah says that when it comes to retirement planning, there’s no replacement for saving consistently. She agrees with Warren Buffet, who says we should not save what is left after spending but rather spend what is left after saving.
Don’t touch your savings
“You put it in there, you leave it in for the long run, and you control the investment costs.” – Avishkar Brijmohun, 32
Avishkar, who resisted the “extreme temptation” to cash out his savings when he changed jobs, says he doesn’t want to be stuck in a nine-to-five job he doesn’t enjoy when he gets to retirement age. Cashing out savings on changing jobs is one of the classic retirement savings mistakes that many South Africans make, setting themselves back enormously. Avishkar says that not cashing out means he has options in the future.
Don’t try to time the market
Don’t try to time the market and shift money around because it’s normally the wrong time anyway.” – Joggie Mentz, 69
Joggie, a retiree who was on the board of trustees of his employer’s pension fund for years, warns savers and retirees alike not to try to time the market as it rarely works.
Make a plan and work it.
“Talk to someone, get a plan, work the plan.” – Kristof du Plessis, 39
Business owner Kristoff says he is often surprised to hear people who have no retirement savings plan at all tell him they want to retire early. Creating a plan is not complicated with the help of an online calculator, such as the one on 10X Investments’ website. Insert some basic information (age, how much you earn, how much you have saved) into the calculator and it will build a personalised retirement savings plan for you.