Retirement, What Retirement?

From the time we realise that money is a valuable and limited commodity we learn that it must be saved. Technically we need to save for everything that we can’t afford to buy right away and more importantly, for the day we no longer want to continue working. The retirement age of 65 is branded into our brains and it looms over us like the Sword of Damocles. Most people spend their entire lives worrying about not saving enough because statistics reveal that the odds are against us.

We have been scared witless by the financial community telling us that only 5 in 100 working individuals will be able to retire. So what will happen to those that don’t have wads of cash saved up? Contrary to what the doomsday people predict, it does not mean that we will be downgrading to a bedsit in Hillbrow and living on noodles and pilchards.

All it means is that we will have to work little longer and get smarter with our money. Both of which are achievable if we make the decision to get on track-“decision” being the operative word. It’s important to accept that saving enough for retirement at the age of 65 is not feasible for the majority of the population. Not only because we don’t save enough but because we will probably live for another 20 to 30 years past 65.

So we have to accept that we may be working to 70. This is not a bad thing, people thrive on being productive and having a reason to get out of bed each morning. Even people who can afford to retire tend to take up part time jobs or volunteer work. Working until you are 70 and not touching retirement funds until then can make a massive difference to the amount you save. For example. If you save 4000 per month from the age of 40 to 65 earning a return of 9% pa and adjusted by 5% pa for inflation, by the time you reach 65 it will be worth 8.5 Million. If you leave your investments untouched and continue to contribute for just 3 more years your investment value will jump to 12,225 Million. I know this sounds like telephone numbers, in fact, even I was so surprised by the difference I had to recheck my calculations.  So if you are close to retirement age speak to your company and ask if you can stay on longer. More and more companies are recognising the value of employees who have many years behind them, the skill and intellectual property they have gathered from their experience is worth a fortune. If you don’t enjoy your job or profession develop some skills in an area that you would like to pursue, that way you can have some fun too.