Retirement often signals a time to unwind, travel, pursue long-held passions, and spend quality time with family. At Just SA, we believe in a better later life – a balance between financial certainty and enjoying time for yourself.
But for many, this phase of life can bring with it a touch of uncertainty and maybe even worry:
- How do I make the most of my financial situation and ensure my retirement is spent as envisioned?
- Will my retirement savings last?
- Have I saved enough?
These are perfectly normal concerns.
The truth is, a secure and comfortable retirement isn't a stroke of luck – it's the reward for wise financial planning. This guide isn't here to confuse you with complex financial jargon. It aims to empower you with knowledge and some practical strategies you can use straight away.
Before we get started
This article offers smart savings strategies for both retirees and those nearing retirement.
Already retired? We'll show you how to get the most out of your annuity income by building strong saving habits.
Approaching retirement? These techniques can help you boost contributions to your retirement accounts (RA, provident/pension funds) for a more prosperous future.
Let's dive in! We'll explore practical ways to maximise savings throughout your retirement journey.
Save more, spend less
For the most part, spending habits change when we enter retirement. However, managing finances amid these rapid changes can often be frustrating and challenging to balance. The good news is there are steps you can take to maximise your savings and minimise your spending. And often, the most effective step you can take is simple:
Spend less
Maybe that gym membership or DStv package isn't used much anymore. There may be a long list of expenses you could cut back on. That's not to say luxuries are bad; everyone relies on certain comforts to enhance their quality of life. But have you taken a careful look at your expenses to identify areas where you can easily economise?
If the answer is no, then we encourage you to properly assess your budget and see if you can find opportunities to save, such as reducing takeaway meals or cancelling unused monthly subscriptions. Cumulatively, this can free up a surprising amount of money each month.
Keep track of your spending
Keeping track of your expenditure can be tricky if you don’t have a financial background. But technology can be a helpful tool. There are many online budgeting apps and resources that can simplify income and expenditure tracking. These tools also help you identify areas where you can save and make wiser spending decisions.
Here's a convenient personal monthly budget template you can use right now.
Remember, even minor adjustments can add up significantly over time, allowing you to maximise your retirement savings further and enjoy the peace of mind that financial security brings. So don't be afraid to reevaluate your spending habits – it's an investment in yourself!
As always, we strongly recommend connecting with a financial adviser for professional support when making financial decisions.
Do you need advice?
It is worth considering advice from a qualified adviser, especially if you need help:
- Understanding your options at retirement
- Taking account of your personal financial circumstances
- Considering how your retirement savings can be used with other savings and investements to meet your financial needs
- Considering the tax implications of your choices
Adopt a savings mindset
Here are a few great habits to build:
- Become a bargain champion. Don't just accept the first price you see – shop around for better deals on everything from groceries to insurance. You might be surprised at the discounts you can score by simply asking.
- Embrace senior discounts. Many businesses offer special discounts for retirees. Take some time to research what's available in your area – you could save on everything from meals to movie tickets.
- Turn rewards into profit. Most banks and credit cards have rewards programmes. Ask about them and see if you can maximise your benefits. For example, look for programmes that offer cash back on healthy groceries or fuel purchases. Every little bit saved adds up!
Try loud budgeting
Silence may not be all that golden, especially in your golden years. Loud budgeting started as a light-hearted joke, became a trend on TikTok, and is now going global. As an emerging trend, loud budgeting may signal that the days of keeping one's finances a closely kept secret are over – and for good reason. Discussing your financial position with family and friends could be a good starting point for making wise decisions with your retirement funds.
Here is how the psychology of 'loud budgeting' can help you protect your retirement savings:
By asking yourself and others critical questions about your retirement income needs and lifestyle goals, you can create opportunities for increased financial awareness. This might involve consulting with a financial adviser to explore various retirement income options and develop a personalised financial plan. It can also be as simple as declaring your plans, goals, and difficulties to your family and friends.
By openly discussing your plans, you create a support system that helps you stay on track with money matters. This fosters accountability and encourages healthy financial habits – a much better position to be in than feeling tempted to overspend or possibly get into debt.
So, don't be shy to talk about money! Being honest with yourself, your adviser, your friends, and your loved ones about your financial means may be necessary to meet your retirement savings and expenditure goals.
Use a portion of your retirement fund for investing
One of the best ways to maximise savings, and therefore your income in retirement, is through financial investments. However, many retirees wonder if they should continue to invest after they've stopped working. The answer really depends on your individual circumstances and risk tolerance.
While some may be comfortable with a more conservative approach to investing, others might explore options for continued growth that yield more but have higher risk. If you're considering allocating a portion of your retirement or pension fund towards an investment, it's crucial to understand the risks and drawbacks involved.
If, for example, you are looking at equities (stocks) for potential growth, then you need to understand the stock market's volatility – there is always the possibility of losing money. If, for example, you are looking for a less risky, tax-efficient investment vehicle, like an endowment, then understanding the implications of a minimum investment amount and exclusion periods is essential.
Any investment has benefits and drawbacks. So, the most essential step is to consult with a financial adviser. They can help you assess your risk tolerance, financial goals, and time horizon to create a personalised financial plan that aligns with your retirement savings and income needs. This way, you can explore the potential for growth while maintaining and maximising your savings in retirement.
Preserve your investments
Retirement is a marathon, not a sprint. So, the key to a comfortable and secure retirement lies in making decisions that help you increase your ability to save.
Sometimes, unexpected situations tempt you to draw from your financial investments. You might consider a large purchase or an investment opportunity promising high returns. It's crucial to remember that the goal of investing in retirement should always be to preserve your existing capital and ensure the savings you’ve invested continue to generate income for many years to come.
So, cashing out of investments prematurely could limit future growth and reduce the amount available to support you throughout your retirement. If you need clarification on a financial decision, we recommend you seek professional guidance.
Use some of your retirement fund to invest in a passion or hobby
Retirement can be a time to rediscover your passions and explore new interests. But did you know that some hobbies can also be a source of income? Whether you're a skilled woodworker, a talented photographer, or a knitting enthusiast, there might be ways to monetise your passion with a little bit of investment.
Here's the beauty of this approach: the possibilities are endless. Consult for businesses in your area of expertise, teach classes to share your knowledge, or sell your creations online or at local craft fairs. Finding an activity that aligns with your interests and skills can be rewarding in more ways than one.
The additional income generated from your passion project can serve a dual purpose. It can bring you joy and a sense of fulfilment, and can help reduce the income you need to use each month to cover your expenses. This, in turn, can make your nest egg last longer and provide greater financial security for your later years.
Consider a later retirement
Working a little longer can be a great way to boost your retirement savings. People are living longer and staying active well into their seventies, so why not add to that retirement nest egg for a few extra years? It can make a big difference, even if it's just part-time work.
Consider a guaranteed life annuity
As we've said, ensuring your income meets your living expenses throughout your golden years can be challenging. This is where guaranteed life annuities can help.
Unlike other retirement income products, which offer variable income based on market performance, guaranteed life annuities provide a reliable income for your entire lifetime, no matter how long you live. This predictability offers several advantages.
Here are a few of them:
- Peace of mind. Knowing exactly how much income you'll receive each month allows for confident budgeting and eliminates the worry of market downturns affecting your retirement income.
- Planning for longevity. Retirement can span decades. A guaranteed annuity safeguards against outliving your savings, a widespread problem for many retirees.
- Focus on your needs. With a set income stream, you can prioritise essential expenses and plan for a comfortable lifestyle without worrying about fluctuating investment returns.
Is a guaranteed annuity right for you?
Here are some factors to consider before deciding if a guaranteed annuity is right for you:
Do you prioritise a predictable income over investment flexibility?
If you seek a steady income that feels a lot like a salary, then a guaranteed annuity may be a worthwhile consideration. Guaranteed annuities offer security, but the drawback is that you give up some control over your savings.
A living annuity might be an option if you're comfortable with some market risk, as living annuities are tied to the market performance of the underlying asset classes. But, you have to manage your drawdown (the amount of money you draw from the principal sum) very carefully. If you don’t balance your withdrawals alongside your life expectancy and your principal amount, you run the real risk of outliving your savings.
If you’re looking for an income that needs to provide for your essential needs for the rest of your life, with zero risk of outliving your savings, then a guaranteed annuity is worth looking into.
Making an informed decision
Consulting a financial adviser can help determine if a guaranteed life annuity aligns with your retirement goals and risk tolerance. By carefully considering your needs, you can choose the best annuity option to maximise your retirement savings and achieve the financial security you require.
Contact us to find out more about our life annuity products.
Summary: Maximising your savings in retirement
This article offers a roadmap to help you maximise your retirement savings and achieve financial security in your golden years.
Here are the key takeaways:
Spend less, save more. Reevaluate your spending habits and identify areas where you can cut back. Even minor adjustments can significantly increase your savings over time.
Develop a savings mindset. Embrace strategies like seeking senior discounts and maximising reward programmes.
Prioritise long-term growth. Consider investing a portion of your retirement fund for continued growth, and consult a financial adviser to help you understand the risks involved.
Protect your nest egg. Resist the urge to tap into your investments prematurely. Your savings need to last throughout your retirement.
Monetise your passions. Explore turning hobbies into a source of income, allowing you to fulfil your interests and reduce your reliance on accumulated retirement savings.
Consider delaying retirement. Working a few extra years can substantially boost your retirement savings.
Guaranteed income for peace of mind. Explore guaranteed life annuities for a reliable income stream in retirement, regardless of market fluctuations or how long you live.
Following some of these steps and seeking professional guidance can unlock the door to maximising your savings and optimising your income in retirement.
Disclaimer: This information is for information purposes only and it should not be regarded as advice as defined in the Financial Advisory and Intermediary Services Act 37 of 2002, or any form of advice in respect of the policy, retirement, tax, legal or other professional service whatsoever. You are encouraged to seek advice from an authorised financial adviser, or to independently decide that the policy or financial product is appropriate for you based upon your own judgment and understanding of your financial needs. Just Retirement Life (South Africa) Limited is a registered life insurance company, regulated by the Prudential Authority of the South African Reserve Bank and the Financial Sector Conduct Authority as an authorised financial services provider (FSP no. 46423).