[DECEMBER UPDATE] Does Being Part of a Retirement Fund Guarantee a Comfortable Retirement? -

In earlier generations, the concept of “retirement planning” seldom crossed the minds of most working individuals. For many in our parents’ generation, a retirement fund deduction was merely a standard entry on their pay stubs, typically directed to a Provident or Pension fund with little follow-up or active management. Often, people were unaware of the precise details of their retirement fund or its investment performance. This lack of financial literacy and transparency has resulted in a significant amount of unclaimed benefits currently seen in South Africa.

Fortunately, with advancements in media and technology, communication and education surrounding retirement funds have significantly improved. However, just being a member of a retirement fund does not guarantee a secure financial future.

Here are several key strategies to help keep you on track toward your retirement goals.

Work with a Financial Adviser

While many of us may shy away from discussing financial matters, these concerns often persist, especially in times of economic uncertainty. Avoiding financial discussions can lead to serious repercussions. Qualified financial advisers can assist you in making informed decisions tailored to your specific circumstances.

Consider asking your adviser these questions:

Will my retirement savings last throughout my lifetime?
Will I have enough funds to meet my aspirations?
Can I financially support my aging parents?
Am I able to cover my children’s educational costs?
Does my legacy plan align with my goals?

Financial advisers provide guidance that helps individuals manage daily expenses, make informed financial choices, and prepare for significant life events—whether they are aspirational (like homeownership), inevitable (such as retirement), or challenging (like unexpected illness).

Keep Your Retirement Savings Intact When Changing Jobs

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

This system splits your retirement savings into two portions: a savings pot and a retirement pot. The savings pot, containing one-third of your contributions, can be accessed before retirement under certain circumstances. The remaining two-thirds are held in the retirement pot and are preserved until retirement.

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

Maximize Contributions for as Long as Possible

Compound interest is a powerful ally for investors. Early contributions during your career have the most significant impact on your retirement savings due to the cumulative nature of compound interest, which allows your funds to grow exponentially over time. In fact, contributions made within the first decade could account for as much as half of the total retirement savings you will need.

With the implementation of the two-pot system, fund members can access their savings pot once every tax year. Nonetheless, it is vital to allow compound interest to operate effectively by keeping as much as possible in the fund for an extended duration.

Take Advantage of All Available Retirement Fund Benefits

Some employees may fail to recognize valuable benefits offered by their employer as part of the retirement plan. In recent years, many individuals have encountered financial, physical, and mental challenges due to global uncertainty and economic turbulence.

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

Regularly Review Your Financial Situation

Being informed about your retirement savings is essential for staying on course. Fund members should receive updates on their retirement funds at least annually; however, nowadays, it is typical to track this information more frequently. Most fund administrators now provide online access, though some funds might update values monthly rather than daily. While daily monitoring isn’t necessary as you save for the long term, it is crucial to periodically ensure that you are on track to achieve your overarching retirement goals and adjust your contribution rate, beneficiaries, or portfolio as necessary.

Stay Committed and Focused on Long-Term Goals

Final Thoughts: Be Proactive with Your Retirement Fund

Your retirement outcomes depend on the actions you take today and continue to take. Whether you are decades away or just years from retirement, there is still time to positively affect your financial future. Start by assessing your financial situation, reaching out to a trusted adviser, and maximizing your retirement fund benefits. By enhancing your involvement in your retirement savings journey, you can transition from merely being a fund member to becoming actively engaged in your financial future. With effective planning, your retirement fund can play a crucial role in achieving your retirement objectives.

Liesl Kleinsmith – Technical marketing specialist at Alexforbes.

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