Don't bank on wishful thinking: Practical solutions for a secure retirement
Retirement is a time that many people may look forward to, envisioning a golden phase of life filled with relaxation, pursuing hobbies, and spending quality time with friends and family. However, wishful thinking about affording retirement can create significant challenges down the line.
Here we will explore three common ways that people deceive themselves about retirement and the importance of considering realistic options to secure a comfortable future.
"Something will happen to save me"
One of the most common self-deceptions about retirement is the belief that something miraculous will occur to rescue one's financial situation. It could be winning the lottery, receiving a surprise inheritance, or a higher-paying job materialising just in time. While it's natural to hope for unexpected windfalls, relying solely on these unlikely events is a risky strategy.
Rather than depending on external factors beyond your control, it is crucial to take charge of your financial future. Begin by assessing your current savings and investment plans and consult with a financial adviser to develop a comprehensive retirement strategy. By setting realistic goals and diligently contributing to your long-term investments, you can build a solid foundation for a comfortable retirement.
"I will pass away before finances become a problem in retirement"
Some individuals convince themselves that they won’t live long enough to face financial challenges in retirement. While it's impossible to predict the future, advancements in healthcare and an overall increase in life expectancy suggest that living longer is becoming the norm. Assuming you won’t be around can be particularly dangerous if it leads to inadequate savings or the neglect of longer-term retirement planning.
Instead of banking on an early demise, adopt a proactive approach by assuming you will have a longer retirement than anticipated. For example, if you are a 65 year old male, there is a 10% chance you will live to 95 and if you’re a 65 year old female, the same probability that you will live to 100. By saving and investing with the mindset of a longer retirement horizon (we suggest at least 30 years), you can ensure you have enough resources to sustain your income for the later years. Furthermore, taking care of your health and maintaining an active lifestyle can contribute to a fulfilling and enjoyable retirement.
"My children will help me"
It is natural for parents to hope that their children will provide financial assistance during their retirement years, should they need it. However, it is essential to remember that your children have their own financial responsibilities and goals to consider. Relying on your children as a primary source of support may compromise their financial well-being.
Instead of assuming your children might shoulder the burden, focus on building a sufficient retirement nest egg. Maximise your savings and explore investment opportunities that align with your risk tolerance and long-term goals. This self-reliant approach allows you to maintain financial independence and provides a sense of security for you and your loved ones.
Focus on what you can do
While wishful thinking can bring temporary comfort, it is crucial to face the reality of retirement planning head-on.
The earlier you start saving for retirement, the more time your investments will have to grow enabling you to purchase an adequate income generating product when you retire, such as a guaranteed annuity or a living annuity.
But without adequate retirement savings, affording the retirement you desire could be problematic. Getting there successfully will be rewarding and you’ll be pleased to have your own money and options instead of relying on family or a lucky twist in circumstances to fund your golden years.
Article by Clive Lazar, Business Development Manager
This article appears in IOL Personal Finance