The sooner you start saving for retirement, the better, but why ? Here are four reasons why. We also explain when you should start.
Retirement: When and why?
Why is making provision for your old age so important? Humans are funny things – we have a tendency to think of ourselves as immortal. But to most, diligently saving for retirement does not come naturally.
That’s why retirement age often creeps up on people, placing them in a distressing financial position for the rest of their lives.
None of us want to spend our golden years worrying about bills and daily essentials. If you take action today and stay committed, you can have peace of mind about your retirement.
Here are 4 reasons why you should take saving for your retirement seriously:
You don’t want to be the family burden.
While retirement is all about spending more time with your children and friends, you don’t want to do so out of necessity. According to recent estimates, only 6% of the South African population can afford to retire. By that logic, many pensioners will have no option but to spend their retirement years at the financial mercy of others – not an enviable situation to be faced with.
A government grant only goes so far.
It’s important to remember that social security is not meant to replace your income once you retire. The reality of living in a developing country is that government grants are meagre and can scarcely cover the monthly expenses of beneficiaries. Research shows that retirees need to earn roughly 70% of their preretirement monthly income to live comfortably. While social security can supplement your retirement money, you should never depend on it as your main source of income.
The good news is that your contributions towards your retirement fund are tax-deductible. You could qualify for a maximum tax deduction of 27,5% of your taxable income during a tax year, subject to a cap of R350 000. In simple terms, this means you can benefit from paying less income tax if you’re making monthly contributions to a retirement fund.
You could be faced with unexpected expenses.
Living in 2021 means you’re part of a global population that benefits from vast advancements in medical science. Because of this, your life expectancy has increased significantly compared to just a few decades ago. While the idea of living for longer appeals to our human nature, it also poses challenges, like the possibility of outliving your retirement savings.
In summary, making provision for your retirement is a no-brainer and should take priority in planning for your future. Don’t be phased by your age. Even if you’re no longer in your 20s or 30s, you can still build up a solid retirement fund with the help of money experts. But the earlier you start, the better.
To find out more about how we can help you with retirement planning, click here.