Highlights in this issue:

*** The best advice you can get is: Knowing what you’re up against…
*** Discover how to avoid these 5 common retirement blunders …
*** Boost your retirement by as much as 41% with this little secret… and more…

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From the pen of Karin Iten

Dear Investment Academy Reader,

According to personal finance journalist Charlene Clayton, only 6% of South Africans are financially independent at the time of their retirement. That’s a scary figure. So if you make up the other 94% that won't be ready, listen up. It’s not too late to boost or even start planning for a comfortable retirement. But, time is of the essence….

That’s why I’ve put together a five step retirement booster plan to help you achieve your goal. And if you’re in your 40s or even your 50s with no substantial nest egg to your name, you can use these steps as a starting point to help pave the way. Remember, if you’re 50 and plan to retire at 65 you only have about 180 more salary cheques left.

So get started today...

5 steps to plug a hole in your retirement lifeboat

Step #1: Do the maths
Your first step is to work out how long you’re likely to live and how much money you’ll need during your retirement years. A ballpark figure is a good starting point and you’ll be able to get this from any of the numerous retirement calculators online. Fin24 have a non-product linked calculator. To access it, visit www.fin24.com/tools/calculator and click on the site’s nest egg calculator.

Now that you have an idea of your expected lifestyle and income, put together a budget that encompasses your projections. This will help you work out if the amount you expect to live on is realistic or not.

Handy tip: Most financial planners will tell you that to retire in the style you’re accustomed to you’ll need to ensure your retirement plan pays out about 80% of your current salary each month.

Step #2: Review your risk appetite
If you’re starting late, remember you aren’t investing for the next quarter or even the next year, you’re investing for at least the next ten years and beyond. That means you need to balance between two conflicting goals – growing your nest egg and keeping it safe. For a good growth mix, retirement guru and senior editor of Money Magazine, Walter Updegrave suggests you invest 60% of your savings in shares and the other 40% in balanced unit trusts, property and bonds.

If you’re not confident enough to make these selections yourself, why not boost your retirement capital by considering a tax-efficient annuity option like the Investec Funds Retirement Annuity unit trust? Or subscribe to The South African Investor and let Leon Kok walk you through the minefield of uni trusts and JSE listed shares and show you how to place your money for stunning gains.

Step #3: Get brutal – put retirement on the front burner
Retirement savings must become your priority. Everything else will have to take a back seat. One way to do this, MSN money writer Liz Pulliam Weston suggests is to “get your children off the dole”. If your kids are out of school, they should be economically independent. If they aren’t, they’re putting your financial future at risk. The same goes for the rest of your family. “If you’ve been the go-to-family member when others run into financial trouble, it’s time to shut down the Bank of You.”

And remember, getting brutal doesn’t just apply to the money you spend. You wouldn’t let one of your employees sit around all day doing nothing, so don’t accept this when it comes to your money. Reassess your assets and investments on a yearly basis. If something isn’t performing, get rid of it.

Step #4: Every cent counts
According to financial fitness expert Iona Smith, you need to take every opportunity to boost your retirement contributions. “Windfalls, extra cash, SARS rebates, should all go into your retirement kitty. Your chances of making it to 90 have never been better; in fact, many financial planners now use 95 as their default life expectancy.”

Step #5: Accelerate debt repayments
Smith also suggests you “get rid of your bond repayment as soon as possible. If you still have some cash left over after paying off your other debt and maximising your retirement contributions, having that house paid off will be a big chunk of money that you can save. Not having a bond in retirement means you can draw less from your retirement savings, allowing them to grow for longer.” The same goes for credit card debt, vehicle finance and any other payments you make on a monthly basis.

Avoid these 5 common late-start blunders:

The most common mistakes people make when they’re close to retirement age and starting to panic about whether they’ll have enough money are:

1. Accepting a retrenchment package without researching other work opportunities,
2. Choosing the wrong investments,
3. Spending pension funds when leaving a job,
4. Failing to plan for health-care costs and
5. Investing in high-risk ventures.

To overcome these dangers, speak to your financial planner or advisor. And while you’re there, ask him or her about the Discovery Life Retirement Optimiser scheme. Retirement expert, Adam Smith believes it has the ability to boost a retirement fund by as much as 41%.

Here’s to your financial freedom,

Karin Iten
For the Investment Academy