The Joy of Retirement

Everyone looks forward to a long and fulfilling retirement after a long and fulfilling career. Those years to do all the things that us as parents give up for the sake of our families, the long vacations to see the world, the chance to indulge your favourite hobby, to finally create that award winning garden or fix up your favourite boyhood car, oh the choices. Sounds great.. Pity about not having those trivial things like clean running water, food or even a roof of your own over your head. On second thoughts, maybe retirement doesnt sound so great after all.

The vast majority of people who are living in South Africa are in serious financial trouble and dont even know it. The lack of retirement planning is at epidemic proportions in this country, with people happily spending vast sums of money on meaningless things such as cars, lcd TVs and other such trinkets, and begrudgingly investing a few hundred rand (if that) on their retirement planning. The common argument that I have a pension plan at work is also invalid because very few people in our current economy remain at a single employer their entire career. When they move jobs, most will take their pension in cash, probably for yet another trinket, destroying their retirement capital.

Of course, my personal favourite is Im still young there is lots of time before retirement. The reality is there is no time whatsoever. Start now!

The following simplified example illustrates just how important it is to begin investing for retirement as early as possible.

Joe Bloggs invest R1000 per month until the age of 65.

He begins at age 40, retirement capital of R3 010 041

He begins at age 35, retirement capital of R5 826 685

He begins at age 30, retirement capital of R10 960 597

He begins at age 25, retirement capital of R20 191 381

The differences are truly breathtaking. The same investment return and inflation assumption have been used for all the scenarios. The substantial tax features of the retirement product have not been factored in, and can if handled correctly will boost these figures substantially.

But there is light at the end of the tunnel, and no, its not an oncoming train.

Next weeks article will deal with several different products suited for retirement planning.

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