Of course, there are many different approaches to funding your retirement life, all of which have their pros and cons that need to be considered. Whatever your approach, there are several common retirement mistakes that need to be avoided at all costs. All the while, ensuring diligent saving habits and effective pension fund development over the course of your career.

Here are the five most common retirement mistakes you need to avoid:

1. Retiring too early
   One of the most common mistakes made by older South Africans is the assumption that we can retire at 55 and go about our retirement life in style. The fact is that retiring at 55 is just not feasible in a South African context for most of us. The vast majority of us will have to keep working well into our sixties and maybe beyond. Whether you are a cautious spender or diligent saver, the amount you can afford to put aside will, simply, not be able to cover the lifestyles you want to lead for as long as we need. Life expectancy increases every year and we will need (on average) ten to fifteen years more years of retirement funding than expected. Unfortunately, retiring early is a privilege reserved for very few and cannot inform our retirement plan decisions.

2. Too dependent on investment and cash accounts
   The desire to place your money and savings into regular accounts is a terrible mistake. Savings accounts, like money market and investment accounts, are a tempting short-term solution to where and how to keep our savings safe while growing. These are a sensible pitstop on your savings journey, but cannot be the final destination. These accounts are too unstable and inconsistent for a retirement fund due to volatility in the equity market. Of course, these accounts will continue to provide useful tools and opportunities to make growing your retirement fund a successful endeavour. However, these will never replace the classic retirement annuities, preservation funds and pension plans that continue to offer safe and secure access to your savings for your entire retirement, without the risk of outliving or losing your money.

3. Thinking you have more disposable income than you do
   There are many romantic notions about what our retirement life might look like, especially when we see a large lump sum in our accounts. Travelling the world, spoiling loved ones, climbing mountains and buying dream cars are all valuable and exciting ways to spend your money, but are they within your retirement budget? They might not be. It is important to take note of exactly how much disposable income you have access to and what you can afford to spend on romantic notions. Most South Africans are seduced by the significant amount of money that you have on hand after retirement. However, it is important to ensure this money lasts and you can pay for your retirement without stress and room for a little extravagance.

4. Failing to adjust your post-retirement lifestyle
   This is probably the most common mistake made by soon-to-retire South Africans, according to financial experts, insurers and bankers. Understanding what you have available to you and what kind of lifestyle you intend to lead are important steps in planning your retirement; however, these two factors will need to account for each other. Basically, we need to be able to afford our post-retirement lifestyle. With all the time, money and freedom that comes with retiring, it can be so tempting to spend extravagantly and explore the world. A reasonable wish for any new retiree. This is hard-earned and well-deserved, but needs to be approached with caution. It may be hard to hold back in your sixties, but you will be grateful for the additional income in your eighties and nineties.

5. Starting too late and saving too little
   There are two simple steps that any working adult can take to help ensure their retirement will be comfortable and easy: starting early and saving more. It is understood that we want to spend as much as we save from our salaries, but this is not always the best choice. Starting in your twenties and saving more towards your pension could be the difference between your dream retirement and a steep drop in lifestyle standards. By becoming more diligent in how we save money and add into our pensions, we can become more and better prepared for our next life stage. Most retirees say that their retirement years approached them faster than they expected and should have prepared more. Get ahead of the curve and start saving as much as you can, as soon as you can. Your future retired self will thank you!

Deciding where you are going to live in your retirement years is an important and difficult decision to make. Whatever your medical or lifestyle requirements, Manor Retirement’s beautiful and bustling retirement communities have a range of senior living options to make living your retirement years easier and more comfortable.

The post The 5 Most Common Retirement Mistakes Made by South Africans appeared first on Manor Retirement.

Retirement and financial independence are commonly used interchangeably. However, there are keen differences between the two. Financial independence can be applicable to any person who has earned enough to sustain their livelihoods without traditional work, regardless of their age. Retirement is, mostly, used to describe people in their later life – usually over 60 years of age – who are financially independent and no longer working.

Distinctions aside, the opportunity for early retirement is becoming more common for people of all ages in our modern world. Digital, technological, market and communication advancements have made earning passive and additional income more accessible than ever before. Both, early retirement and financial independence are more possible today than ever before.

Early Retirement and Financial Independence

Early retirement, in particular, refers to people who’ve become financially independent before the usual retirement age – 60, in the case of South Africa. Many of these early retirees have become squeamish at the use of the term ‘retirement’, but the reality’s that if you’re financially prepared to end your career, you can retire early! Achieving financial independence and leaving the workforce means that we’ve got more time to enjoy our accumulated wealth and spend more time with our friends and family.

The Benefits of Early Retirement

• Running errands and making plans is easier
  With an early retirement, your days are freed up to do what you need to, when you want to. Early retirees can run their errands or do a weekly shop at times that are most convenient to them. Make plans with friends and family more easily, avoid the worst of weekday traffic and enjoy less busy parks, shopping centres, gyms or movie theatres.
• Try out free and discounted activities
  Having all this extra free time allows early retirees to take advantage of weekday or monthly specials at local museums, movie theatres, travel agencies and restaurants. Don’t miss the 50% discount at your favourite restaurants and shops, reduced return flights or free-for-everyone days at the best museum in town.
• Enjoy a better social life
  Most professionals work five days a week and from 8am to 5pm. It might not be this schedule exactly, but having the opportunity to develop a thriving social life can be difficult for those working a full-time job. Early retirement gives those who dedicated themselves to their careers for decades a chance to expand their social circle or enjoy new and different night-life and activities.
• Focus on your friends
  In the digital age, it’s tempting to maintain some relationships online or over phone calls. The reality’s that by retiring early, you can focus your time and energy on your offline relationships and connections. Spend more time with your favourite people in the (real) world and when it’s convenient.
• Spend more quality time with your family
  One of the best parts about retiring – one of many – is that you’ve got more time to spend with your loved ones. You’ve got the freedom, space and flexibility to spend more quality time with your family or speak to ones overseas. Perhaps you could even visit them more often. Early retirees can focus on their spouses, kids, grand-kids and extended families without the hindrance of a busy work life.
• Get in better shape
  Without having to spend your whole day at the office, you can take better care of your health. Early retirees have the opportunity to improve their nutrition and exercise more frequently. After years of ordering takeaways, barely sleeping and stretching at your desk, retirees can focus on eating better, sleeping better and staying in shape. Not to mention, these are all so important for maintaining our mental health.
• No fear of getting fired
  Without having a traditional job, you no longer have to worry about job security in this hyper competitive labour market. Retiring early, because you’re financially independent, gives you the freedom to live your life the way you want to. You’ll never have to adapt your lifestyle to appease your employer – ever again!
• Finding new purpose in life
  Many in the working population mistake their life’s purpose for their professional purpose. As the saying goes, work is ‘what you do, not who you are’. Retirement, finally gives dedicated professionals the opportunity to prioritise other areas of interest and forgotten passions. The additional time and energy those early retirees have for new activities and interests can help them find new purpose in life.

Possible Concerns About Early Retirement

The most common concerns about early retirement are whether or not you’ve got the financial and social resources to maintain your current lifestyle without work, and what to do with all that free time. This takes planning and experience. You need to plan out your yearly budget and determine what you’ll need. This is usually a smaller number than you think, and most early retirees are well-prepared to live a happy life.

As far as the free time, potential laziness and wasted days that many considering early retirement are concerned about: trust yourself. You need to use this time to find new hobbies, try new activities, travel the world more and spend less time on social media and in your emails. Perhaps you’re a master pianist in waiting or an author looking for the right story, maybe you’re a capable endurance athlete or a gifted chef. You won’t know until you try.

Early Retirement Is Worth It

Whether you’re volunteering for a charity organisation, planning to visit loved ones in other countries or training to climb Kilimanjaro, early retirement and financial independence means that you have the time and resources to commit to them. Find new purpose, explore new places and try new things, the possibilities of an early retirement lifestyle are endless.

Deciding where you are going to live is a critical investment in your post-retirement lifestyle. If you are a retiree and considering where to call home on this exciting new chapter of your life – consider joining one of Manor Retirement’s beautiful and bustling communities.

The post What Early Retirement Could Look Like for You? appeared first on Manor Retirement.

These feelings are not unwarranted because there’s no one-size-fits-all approach to retirement planning for South African families and individuals. In order to live out your retirement years in style and comfort, you’ll need to consider a variety of complex, individual circumstances to create the perfect retirement plan for you.

Even general guidelines, such as this, will only provide some direction for the steps you’ll need take on your retirement journey. From choosing the right financial advisors, investments and banking services to deciding where to live and what your post-retirement expenses will be; there are many thoughts about how South Africans should approach their retirement.

Here is a list of things you should know before considering your retirement:

A simple savings goal is not enough

Whatever your savings goal is, it probably won’t be the right number. Being financially independent post-retirement isn’t about meeting a saving ambition that you hope is enough. It’s about identifying your desired lifestyle, knowing your expenses and ensuring there’s money put away to meet those needs, for years to come. Basically, your savings goal needs to be determined by how much you plan to spend in your retirement, not the other way around.

Post-retirement expenses can be more than in your professional years

It’s a common misconception that you’ll be spending less in retirement than when you’re working. This can be true, but it’s not always. Yes, certain expenses will disappear in retirement, like paying into a pension fund or for petrol on your daily commute, but these savings could be needed for other post-retirement expenses.

For example, higher medical costs, visiting family around the globe, increasing inflation on amenities and other lifestyle changes can increase your expenses. Most retirees are looking to maintain or improve their current lifestyle – not to reduce it. A retirement plan should consider how to replace annual earnings and plan for new expenses that may arise.

A maximum annual, tax-deductible amount on earnings is critical, but not sufficient

By allocating money to a pre-retirement fund, you’re able to reduce your taxable income for any given year, while building wealth in the meantime.  However, individuals in higher tax brackets will not earn the savings needed to fund their current or future lifestyle expenses. The 27.5% tax deductible that South African investors are entitled to are subject to terms and conditions, such as a R350 000 monetary cap on deductibles per annum.

Even with years of tax deductibles under your belt, these probably won’t be able to replace a substantial yearly income. Investors and soon-to-be retirees should look to grow their savings beyond their tax-deductible earnings. It’s important to consider tax-free savings accounts, growing retirement annuities, smarter vehicle and residential investments and other ways of diversifying your earning potential.

Post-Retirement work can help to meet your savings goals, but can’t guarantee them

Yes, it’s possible for you to keep working into your sixties and seventies to secure a larger retirement fund for you and your family. However, there are a variety of circumstances beyond your control that can limit your earning potential post-retirement. Yours or your spouse’s health could deteriorate or your company could have different employment policies for older workers.

This is, especially, true for occupations that require healthy and physically-present professionals, such as doctors, teachers and tradespeople.  Even if remote and adapted work is possible, there can be limited job security for retirement-age employees. They can be susceptible to downsizing cuts or reduced wages, after years of earning larger remuneration – and part-time, consultant and contract work that match your previous earnings can be hard to find.

Retirees can still have a bond on their house after retiring

Most professionals are hesitant to carry debt into their retirement. If you’re considering downsizing, buying a new home with cash or paying off a current home at an attractive interest rate, you can leverage those finances for other post-retirement spending. Post-retirement, you’ve got to balance the benefits of living debt-free with the opportunity cost of having less cash available for other purposes. Retirees should know how long they plan to live a that mortgaged home, what their post-retirement expenses are and what other financial means they have to meet their lifestyle needs.

Your retirement plan must account for future changes

Market volatility is a common concern for those entering their retirement years. The possibility of depleting your financial savings will concern even the most prepared, soon-to-be retirees. Some retirement plans will focus on risk-averse investment strategies, such as bonds or fixed annuities. This, however, can hinder potential earning opportunities.

In our modern world, people are living longer, digital platforms are making it easier to invest and access to global earning opportunities is growing by the day. As we mentioned earlier, you won’t know exactly how much money you’ll need for a happy and healthy retirement. Risk-averse strategies can secure a certain amount of money, but it can also limit your earning potential post-retirement.

If you’re considering growing your potential earnings into your retirement years, you should consult with experts who understand your personal circumstances and post-retirement goals. Financial and investment planning for upcoming retirees needs to be advised by qualified, capable and experienced financial advisors who can help you meet your lifestyle expectations.

Deciding where you are going to live is a critical part of defining your post-retirement lifestyle. If you are a retiree and considering where to call home on this exciting, new chapter of your life – consider joining one of Manor Retirement’s beautiful and bustling communities.

The post What you need to know before planning your retirement appeared first on Manor Retirement.