Whether you’ve just entered the working world or have been in it for years, saving for your retirement is key to setting yourself up for a post-work life you can truly enjoy. This quick Q&A will give you the basics to get started.
- Is it too late to start saving for retirement?
It’s never too late to start saving for your retirement. Even if you start a bit later – for example, in your 30s – you still have a significant number of working years ahead of you to put money into a retirement plan. Ultimately, anything you can save is better than nothing. Once you’ve started saving, keep going until you retire!
- How do you calculate how much you need for retirement?
You need to make sure you have enough to achieve your goals and take care of your health. If your goal is to travel the world during your golden years, you shouldn’t have to shelve those dreams due to a lack of funds. Start saving now so you can maintain the same quality of life, pay your bills, and enjoy whatever adventure you choose to pursue.
To get an estimate of how much you will need, use this free online retirement calculator.
- How can I save for my retirement?
Two of the most commons options are:
- Employer retirement funds: Fewer companies offer retirement funds these days – currently less than half in the case of smaller businesses. If they have one, a monthly contribution is taken off your salary. With a pension fund, for example, you may take up to a maximum of one third of your savings in a cash lump sum when you retire.
This cash lump sum is taxable. The balance must be used to purchase an income/annuity, and the income/annuity is taxable. If your total retirement investment in the fund is less than R247,500, you can take the full amount as a cash lump sum, subject to tax.
With a provident fund, you may currently take the full fund value as a cash lump sum, subject to tax. You may then reinvest your after-tax lump sum.
- Retirement annuities: If your employer doesn’t offer a fund, you can start saving in a retirement annuity, which is basically a personal pension plan. Your contributions are tax-deductible from your income up to certain limits, and therefore decrease your taxable income. In addition to this, contributions to pension and provident funds are also tax-deductible.
- How much money do you need to start a retirement fund?
There’s no set amount of money required to start saving for your retirement. The most important thing is simply to start saving as soon as possible. It’s also critical to note that compound interest really starts working for you over time. The longer you’re in the market, the more growth potential for your capital. Most of us don’t have a big lump sum to invest, but putting away smaller amounts regularly can be just as effective.
- What happens to my retirement savings when I die?
As a member of a retirement fund, you may nominate beneficiaries to receive the benefits upon your death. The trustees of the fund (by law) have the discretion to pay your benefits to your dependents in a manner that the trustees deem fair and equitable. In the absence of any dependents, the benefits will be paid to the nominated beneficiaries.
To get started or to find out more, visit Old Mutual.
