In earlier generations, the concept of “retirement planning” was seldom acknowledged by most working individuals. For many of our parents, a retirement fund deduction was just a standard item on their pay slips, typically designated for a Provident or Pension fund with limited oversight or proactive management. It was common for individuals to be unaware of the details regarding their retirement fund or its investment performance. This lack of financial education and transparency has resulted in a significant amount of unclaimed benefits currently observed in South Africa.
Thankfully, with the advancements in media and technology, the communication and education about retirement funds have significantly improved. However, merely being enrolled in a retirement fund does not ensure a secure financial future.
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Here are several key strategies to help you stay aligned with your retirement goals.
- Work with a Financial Adviser
While many of us may feel awkward discussing finances, these concerns often linger, especially during economic instability. Avoiding financial discussions can lead to serious repercussions. Qualified financial advisers can guide you in making informed decisions tailored to your specific situation.
Consider asking your adviser these pertinent questions:
- Will my retirement savings sustain me for my entire life?
- Will I have enough funds to achieve my goals?
- Can I support my aging parents financially?
- Am I able to pay for my children’s education?
- Does my legacy plan match my aspirations?
Financial advisers provide expert guidance to help individuals manage daily expenses, make informed financial decisions, and prepare for significant life events—whether aspirational (like buying a home), inevitable (like retirement), or challenging (such as unexpected illness).
- Safeguard Your Retirement Savings When Changing Jobs
Previously, leaving a job often resulted in cashing out retirement savings to settle bills or cover expenses. However, with the introduction of the two-pot system, accessing retirement savings upon leaving a job is no longer permitted.
This system divides your retirement savings into two portions: a savings pot and a retirement pot. The savings pot, representing one-third of your contributions, can be accessed before retirement under certain conditions. The remaining two-thirds are held in the retirement pot and are preserved until retirement.
By exercising discipline and concentrating on long-term growth, you can build a more secure financial future.
- Maximize Your Contributions for as Long as Possible
Compound interest is a powerful tool for investors. Early contributions during your career significantly impact your retirement savings due to compound interest, allowing your funds to grow exponentially over time. In fact, contributions made in the first ten years could make up as much as half of the total retirement savings necessary.
With the two-pot system, fund members can access their savings pot once every tax year. Nevertheless, it’s crucial to allow compound interest to operate effectively by keeping as much as possible within the fund for an extended duration.
- Take Advantage of All Available Retirement Fund Benefits
Some employees may overlook valuable benefits offered by their employer as part of the retirement plan. In recent years, many have encountered financial, physical, and mental challenges due to global uncertainty and economic disruptions.
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Employee benefit programs often include more than just savings. Employees may have access to rewards, medical aid, life insurance, critical illness, and disability coverage in addition to mental health support. These benefits are designed to enhance employees’ personal and financial well-being.
- Regularly Review Your Financial Position
Being informed about your retirement savings is essential for staying on track. Fund members should receive updates on their retirement funds at least once a year; however, it’s becoming increasingly common to monitor this information more frequently. Most fund administrators now provide online access, although some funds may update values monthly rather than daily. While daily monitoring is not necessary for long-term savings, it’s vital to periodically review your progress toward overarching retirement goals and adjust your contribution rate, beneficiaries, or portfolio as needed.
- Stay Committed and Focused on Long-Term Goals
Final Thoughts: Be Proactive with Your Retirement Fund
Your retirement outcomes are determined by the actions you take today and continue to take. Whether you are several decades away or just a few years from retirement, there’s still time to positively impact your financial future. Start by assessing your financial situation, consulting with a trusted adviser, and optimizing your retirement fund benefits. By enhancing your engagement in your retirement savings journey, you can move from being merely a fund member to being fully invested in your financial future. With effective planning, your retirement fund can play a vital role in achieving your retirement goals.
Liesl Kleinsmith – Technical marketing specialist at Alexforbes.
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