Some people are able to achieve financial security for their retirement, while others aren't. In a research project commissioned by Sanlam, it was found that there are seven habits common to those able to enjoy their retirement in relative comfort from a financial perspective.
Some people are able to achieve financial security for their retirement, while others aren't. In a research project commissioned by Sanlam, it was found that there are seven habits common to those able to enjoy their retirement in relative comfort from a financial perspective.
These habits do not only apply to retirement, but to financial well-being as a whole.
The first is that successful individuals begin saving from an early age, and they save for as long as they can.
As they save, so their wealth multiplies through investment returns and through the miracle of compounding, the so-called eighth wonder of the world.
The second habit is that they save as much as they possibly can and resist the urge to spend their money on unnecessary purchases.
An extreme example is Warren Buffet, who is known to drive a modest car and has lived in the same house for decades, despite being one of the richest individuals on the planet.
Third, in most instances successful people not only contribute towards their company pension or provident funds, but also invest in other forms of investment.
They also fully utilise tax-saving benefits available to them from products such as retirement annuities.
Importantly, they do not use investments that have been accumulated for the purpose of retirement until after they retire.
Unfortunately many people succumb to the temptation of cashing in their retirement benefits when they move from one job to another and use the funds for purposes other than those for which they were intended.
Successful people have the habit of striving to find ways to continue to earn an income after they officially retire at their designated retirement age.
By so doing, they delay the need to draw funds from their investments, and they are also able to keep busy and active.
The sixth habit exhibited by successful retirees is that they ensure their money works for them even after they retire.
Sometimes people believe the right thing to do once they retire is to adopt a conservative approach to investing and move their wealth from growth assets such as equities into less volatile assets such as bank accounts and fixed deposits.
Although it is often sensible to invest some money in this way, an ultra-conservative approach towards growth assets can erode a retiree’s wealth in real terms, as a cash-only investment strategy can run the risk of not being able to keep pace with inflation.
The seventh habit is that most successful retirees make use of the expertise of a professional financial planner to assist them to navigate the road to their financial security.
It is never too late for anyone to adopt these seven habits, regardless of where they are in their career path, and doing so could make the world of difference to their quality of life during their golden years.
* Rands and Sense is a monthly column, written by Ross Marriner, an accounting and tax practitioner and Certified Financial Planner.
