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Is being a member of a retirement fund enough for a comfortable retirement? [DECEMBER EDITION]

In previous generations, the idea of “retirement planning” was rarely on the radar for most working individuals. For many of our parents, a retirement fund deduction was simply a normal entry on their pay slips, often allocated to a Provident or Pension fund with minimal follow-up or active management. It was common for people to lack awareness about the specifics of their retirement fund or its investment performance. This gap in financial literacy and transparency has led to a considerable amount of unclaimed benefits currently observed in South Africa.

Fortunately, thanks to advancements in media and technology, the communication and education surrounding retirement funds have greatly improved. However, merely being part of a retirement fund doesn’t guarantee a secure financial future.

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Here are several essential strategies to help keep you on track toward your retirement objectives.

  1. Collaborate with a Financial Adviser

While many of us may hesitate to discuss finances, these thoughts often linger, especially during times of economic uncertainty. Ignoring financial conversations can lead to serious consequences. Qualified financial advisers assist you in making informed decisions tailored to your unique situation.

Consider asking your adviser the following questions:

  • Will my retirement savings last throughout my lifetime?
  • Will I have sufficient funds to meet my aspirations?
  • Can I provide financial help to my aging parents?
  • Am I able to cover my children’s educational expenses?
  • Does my legacy plan align with my goals?

Financial advisers offer guidance to help individuals navigate daily expenses, make informed financial choices, and prepare for significant life events—whether aspirational (like homeownership), inevitable (such as retirement), or challenging (like unforeseen illness).

  1. Preserve Your Retirement Savings When Transitioning Jobs

In the past, leaving a job often meant cashing out your retirement savings to settle debts or manage expenses. However, with the introduction of the two-pot system, accessing retirement savings upon job departure is no longer permissible.

This system divides your retirement savings into two segments: a savings pot and a retirement pot. The savings pot, which contains one-third of your contributions, can be accessed before retirement under certain conditions. The remaining two-thirds reside in the retirement pot and are preserved until retirement.

By maintaining discipline and focusing on long-term growth, you can establish a more secure financial future.

  1. Contribute as Much as Possible for as Long as Possible

Compound interest serves as a powerful ally for investors. Early contributions during your career have the most substantial impact on your retirement savings due to the power of compound interest, which enables your funds to grow exponentially over time. In fact, contributions made during the initial decade could account for as much as half of the total retirement savings you’ll require.

With the implementation of the two-pot system, fund members can access their savings pot once every tax year. Nonetheless, it’s critical to allow compound interest to work effectively by preserving as much as possible within the fund for an extended period.

  1. Make the Most of All Available Retirement Fund Benefits

Some employees may overlook valuable benefits their employer offers as part of the retirement plan. In recent years, many individuals have faced financial, physical, and mental challenges due to global uncertainty and economic turmoil.

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Employee benefit programs often encompass more than just savings. Employees might have access to rewards, medical aid, life insurance, critical illness, and disability cover in addition to mental health support. These benefits aim to bolster employees’ personal and financial well-being.

  1. Periodically Assess Your Financial Situation

Staying informed about your retirement savings is crucial for maintaining your course. Fund members should receive updates on their retirement funds at least annually; however, today, it’s common to track this information more frequently. Most fund administrators now provide online access, although certain funds might update values monthly rather than daily. While daily monitoring isn’t necessary as you save for the long term, it’s essential to periodically ensure that you’re on track to meet your overarching retirement goals and adjust your contribution rate, beneficiaries, or portfolio as needed.

  1. Remain Steadfast and Focused on Long-Term Objectives

Final Thoughts: Engage Actively with Your Retirement Fund

Your retirement outcomes hinge on the actions you take today and continue to take. Whether you’re decades away or just years from retirement, there’s still time to positively influence your financial future. Begin by evaluating your financial position, reaching out to a trusted adviser, and maximizing your retirement fund benefits. By increasing your involvement in your retirement savings journey, you can transition from simply being a fund member to becoming fully engaged in your financial future. With effective planning, your retirement fund can be instrumental in achieving your retirement objectives.

Liesl Kleinsmith – Technical marketing specialist at Alexforbes.

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