How much? Here are some tips on deciding how much you should save for retirement.

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How much Here are some tips on deciding how much you should save for retirement

By Bruce Cameron

Your personal targeting of simply saving 10, 15 or 20 percent of your annual income for your working life is simply not going to be enough for retirement.

Ideally, you should have determined two levels of retirement income:

• A realistic best-scenario retirement income that will meet your desired lifestyle in retirement (a ‘wants’ list).
• A basic minimum level of income that will cover the essentials (a ‘needs’ list).

Your retirement planning should always aim to provide at the ‘wants’ level, but there should never be a risk that your replacement ratio will drop below the ‘needs’ level.

But if you really want to drill down, then you need to be answering questions, such as:

• Age: You could very well land in retirement for the same length of time that you save for retirement. The average life expectancy at age 65 is about 83 years for males and 88 years for women. But remember, these are averages. You could live for much longer, which means that you will need more money.
• Accumulated wealth: The more you have accumulated, the sooner and/or wealthier you will be able to retire.
• Your withdrawal rate: In retirement, you need to draw down on what you have saved in the past. This means talking account of such things as inflation, investment returns, tax, the type of annuity you buy and the lifestyle you want to live.
• Where you intend to live in retirement: If you want to live on the Atlantic Seaboard of Cape Town, you will need a lot more money than if you want to live in Loxton in the Karoo.
• Healthcare: Will you be happy with a hospital plan as opposed to a comprehensive plan?
• Food: Eating out most nights at top restaurants is a lot more expensive than eating
simple, healthy meals at home.
• Travel: Travel, both local and foreign, is high on the agenda of many retirees. In addition to often finding tourism appealing, many retirees have children and grandchildren.
• Assisting children: An increasing number of pensioners find that they need to support their children and grandchildren.
• Keeping up with the Joneses: This ranges from banking with an expensive private bank to having a cheap pensioner account at a high-street bank, through to finding out about and using pensioner discounts.
• Motor vehicles: Two cars, one car or no car? And if a car, what type of car? Most people can get by using public transport and Uber, but instead many of us waste money on expensive motor vehicles.

All the things listed above are merely estimates – you need to string them together. If you want to do the job properly, then get yourself a financial adviser, who will help you with what is called a financial needs analysis. He/she will help you to:

• identify how much you need for retirement and other financial goals;
• identify whether you can afford to retire and when you should be able to retire;
• identify the needs of your dependants if you are no longer able to provide for them;
• identify how you should structure your medium- to long-term financial plans;
• tell you what you can afford and what you cannot;
• clarify your retirement lifestyle goals; and
• often it gives you a wake-up call.

Financial advisers can not only act as support during your retirement phase, but they could be that much-needed reality check that keeps you and your money dreams grounded.


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