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How much is enough?
Create a Personal balance sheet
Conclusion
Retirement planning is the process of identifying your wants and needs, developing plans to achieve them, acting on those plans and continually reviewing and revising them as you gain new knowledge and experience.
In future good retirement planning will create the great dividing line in society, separating the "haves" from the "have-nots".
Thanks to the advances in health care and nutrition, the life span of the average South Africa has increased dramatically. A longer life expectancy increases the likelihood that you will be able to work longer but you will also need to save more for your retirement. Putting money away for retirement is a postponement of gratification.
Your retirement plan will most probably be the largest investment you will ever make.
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How much is enough?
The big question is how much money does a person have to amass for a comfortable retirement? This is difficult to answer as it depends on individual expectations on retirement, e.g. different lifestyles, age at retirement and life expectancy. In addition, there are unpredictable factors such as inflation and investment performance to consider. A possible indication of one's needs can be predicted in relation to an individual's final salary.
Should an individual wish to retire at age 65 on R240 000 per annum, and still be healthy at age 85, without drastically altering his/her lifestyle, an amount of R4 800 000 would be required to get through what is effectively a twenty year holiday, without taking into account the ravages of inflation.
How long would one have to contribute to a retirement plan to amass this substantial sum? Again this varies, depending on whether monthly or annual payments were made; whether the payments ceased at any time; the performance of the investments in which the money was invested, and whether low or high-risk funds were chosen. All these factors should be weighed up together in order to reach a decision but remember, it is never too early to begin saving.
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Create a Personal balance sheet
No matter what your financial circumstances or goals are, you can't plan for tomorrow until you know where you stand today. Your first step should be to create your own balance sheet. By doing this you will calculate your net worth. The balance sheet will highlight the value of your assets and any liabilities. You will be able to determine which assets have appreciated and those that have depreciated. Your assets should include:
- Investments - shares, unit trusts, policies, pension and provident funds and RA's.
- Property - your home, farms and holiday home.
- Personal items - stamps, coins, art and antiques.
- Cash - money in call and savings accounts.
Your liabilities should include:
- Bonds - private homes and holiday homes.
- Education - for your children.
- Credit cards.
- Overdrafts.
- Secured debt - cars and business.
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