Rands and Sense:
By Khwezi Jackson
We’ve all heard the expressions ‘Life is short’ and ‘You only live once’. And everyone knows a story of someone who passed away unexpectedly, a reminder that none of us knows what tomorrow holds. We might go to bed full of life today and not wake up to see tomorrow.
But we’re also always told that we need to look to the future. For instance, investment companies tell us we need to invest for retirement (i.e. tomorrow). They say we must save so we can retire comfortably one day. But this focus must surely be balanced with being able to enjoy life today, too.
So where does one draw the line between living in the moment and preparing for the future?
We seem to forget that we could be living our best years, yet we’re looking past them to get to retirement. We go through each week with the subconscious knowledge that it's okay to give up 70% of our days at work because “One day, at age 65, I will retire and have all the time in the world to dictate what I do with that time.”
But what if tomorrow never comes?
I am certainly not encouraging anyone to be reckless and irresponsible, but I have started asking myself where I should draw the line between being in the present and ensuring that one day when I retire, I’ll enjoy the fruits of my labour. I don't want to live paycheque to paycheque because I don't want to deny myself the pleasures of today in order to save for retirement. I also don’t want to not be able to retire comfortably — or, worse, not be able to retire at all.
I don't have the answer yet but I believe that asking the right questions is the best place to start.
One important question I’ve been pondering is: Will 65 be the right age for me to retire? Firstly, 65 is actually today a fairly arbitrary point at which to retire. It’s an age set in a very different society at a time when life expectancy was not what it is today and when the notion of not working was not seen as a part of one’s lifetime. This is why my retirement date is no longer fixed in my mind at the age of 65. Instead, I’ve set my target as the point in my life when my income from my investments exceeds my expenses. To explain this more simply: it’s when I have enough saved to live comfortably while drawing down no more than 4% of my retirement savings every year.
I am working towards this goal so I can free myself from the Monday-to-Friday corporate grind, and focus my time and energy on projects that are close to my heart instead — like enjoying my passion for playing chess!
If you, like me, would like to achieve the goal of exiting the corporate world sooner rather than later, take a close look at your budget and fix any leaks, such as unnecessary credit card debt. Ask yourself some tough questions, such as ‘Are my monthly car repayments very high? If so, is it worth driving a car that is costing me so much?’ and ‘Is my rent or bond costing me an arm and a leg?’
I’m not saying you should drive a deadbeat car or live uncomfortably, but there is a line between comfort and over-indulgence. (But, of course, if the fancy car and the big house are what bring you joy then that’s totally fine, too.)
However, for those who want to join me in revising our projected retirement date, your retirement fund, tax-free savings account, unit trusts and other investments are all tools you can use to build that dream. Your retirement savings fund and tax-free savings account will be crucial in your later years, perhaps post-45, as these investment vehicles do not attract tax on income earned or capital gains.
However you decide to construct your plan to reach your dream, the time seems ripe for the younger generation to rethink their retirement age. Let’s aim to achieve financial freedom way before 65. There’s just too much to live for to wait until then to start living.
Khwezi Jackson is an investment consultant at 10X Investments.