Setting up a retirement plan is relatively simple. Most companies will have a HR department that will be able to assist you in this regard. However, they will most likely only assist you with your pension plan. This is rarely enough for a comfortable retirement. First order of business for anybody is to find a company that specialises in financial planning. They need to be accredited as per South African law. From personal experience, I would recommend enquiring at the leading companies in the country. You will be able to rest assured that they are accredited and even though they may be a little more expensive than the smaller companies, you know that their staff will have adequate experience to recognise the pitfalls associated with investing and retirement planning.
First thing you will be asked to do is discuss your current budget and lifestyle. Lifestyle is obviously intrinsically linked to your budget. The higher your income, the higher your level of living. During your working life, you can look forward to pay increases and performance bonuses, but when you retire your income is fixed and your budget will most likely be somewhat smaller. Having a proper retirement plan in place can ensure that you retire within the lifestyle you have become accustomed to during your working life.
If you are a high ranking executive in your company, you probably have a significant amount of disposable income to invest for your retirement. You probably live the good life with a big home, fancy car, designer clothes and expensive hobbies. What about the middle income family? How can you ensure that you are living within your means and can put away money every month in addition to your pension, so that you can retire comfortably? My advice, live modestly and you will become accustomed to a life where you don’t want for anything. If you learn how to live well within your means, you will not only live a richer life with regards to your life experience and friends, but you will also appreciate money more and ultimately retire in a comfort level that you have cultivated throughout your life.
Cultivating this healthy lifestyle saves a lot of money and can be very rewarding in many unexpected ways. And if done with thought and care, you will be rather well off when you retire and will also leave a legacy that will be respected by your family and friends.
It all revolves around cultivating a culture of frugality and good financial values. This does not mean you need to be a penny-pinching scrooge, but rather that you evaluate what is worth spending money on and what isn’t. This sounds simple and it is, but most people need to learn how to do it!