Enjoying your retirement

With life expectancies being greater than ever, retirement could likely be the longest phase of your life. It is imperative that there be a plan in place that is well equipped not only to spend and enjoy your retirement years, but also to help avoid running out of money. Retirement planning is an extremely sophisticated process and retirees should not attempt this on their own. In addition to the risk of outliving your assets, other risks include taxes, inflation, the rising cost of healthcare, stock market and interest rate volatility.

The 9 Key Ingredients to a successful retirement plan are:

1. Growth Potential: You want your income to keep pace with things like inflation, taxes, technology changes, rising medical aid premiums, long-term care, etc. A well-diversified and well balanced portfolio will allow you to keep pace with your changing lifestyle over the long term.
2. Safety Provisions: Every retirement plan should contain clear strategies to help guard against suffering large investment losses and running out of income.
3. Tax Efficiencies: A successful retirement plan should entail two tax strategies. First, money should grow with as little (or no) tax consequences as possible. Second, income should be received in the most tax-efficient way that is legally possible. Working closely with qualified financial planner is a key component.
4. Income You Cannot Outlive: With the improvements in modern medicine, today’s life expectancies are greater than ever. Many studies show that by the year 2030, more than 2/3rds of the people alive in the USA will be over the age of 60! Ideally your plan should make provision for income to last for at least 30 years after you retire.
5. Income Growth Potential: In order for your income to grow, a retiree’s assets must grow at a rate that exceeds the withdrawal rate. This means that investing a portion in the stock market plays a vital role in retirement planning. Unfortunately many retirees make the mistake of investing too conservatively and failing to consider the impact of inflation.
6. Maintain Control: In the old days, retirees were given the option of buying a pension, known as a Life Annuity, in exchange for the accumulated savings in their retirement savings fund. Although a you were guaranteed not to run out of money, you essentially gave up control of your investment and when you passed away, so did your pension (unless you died within the initial guarantee period). These days there is the option of a Linked Life Annuity where you maintain control of your investment capital. The big advantage of this option is that, managed correctly, it can become a valuable asset in your estate.
7. Maintain Access: Every retirement plan should include setting some money aside for the unexpected emergency.
8. Professional Supervision: Retirement is a time to relax and really enjoy life. The very last thing you should be doing is worrying over money and your financial plan. That’s why it is important that you’re taken care of by a professional planner.
9. Consolidation: Most retirees prefer to consolidate instead receiving multiple statements from many different companies. The advantage of retirement investment options these days is that you can still diversify your investment across multiple asset classes and/or investment companies, all under a single, easy to manage, investment plan.

If you know of someone who’ll be retiring in the next year, please encourage them to seek professional guidance, particularly as the decisions taken now will influence the next 30 years or longer.