Are you on track to receive enough income?

By the time an individual retires, they should have saved enough to receive an income that can replace what they have been earning to cover ongoing living expenses, Ernestu Augustus, Senior Consultant at NMG Benefits Namibia said.

Planning for retirement is not only for those approaching retirement age. Preparing now – regardless of age – can make the difference between enjoying retirement or struggling to get by.

Retirement funds are set up to help members save for retirement. When reaching retirement age and no longer being able to work for your employer, the money saved in the fund will help provide an income.

A universal fact remains that very few retirees have enough money saved to provide them with the income they need in retirement. Upon retirement, retirees need to rely on their own savings, and especially the savings made through their employer's retirement fund, to support them in retirement.

Many individuals are forced to retire earlier than they had planned, they live longer and inflation takes its toll. “If people want to maintain the same standard of living in retirement that they had while working, they will need a sizeable amount of money,” says Augustus. The current advances in technology and medicine means people are living longer and needing to fund for income to sustain for longer in retirement.

Around the world, individuals are feeling immense pressure on their overstretched budgets. When faced with debt and rising expenses in a difficult job market, it may seem difficult to do, but people need to look after future needs and actively plan to reach a better retirement, contends Augustus.

Affordability

Augustus also states that “some important reasons why retirement has become unaffordable is that individuals either don’t contribute enough and often don’t start saving early enough. When a person leaves their employer and change jobs, it’s important that they stay away from taking their benefit in cash, which forces them to start saving for retirement from the start again.”

The sooner an individual starts saving for retirement, the less they will need to save each month to reach retirement savings goals, as they will have been saving for a longer period.

Knowing if retirement savings are adequate can create financial anxiety. Online calculators are available that help review the pension income likely to be received in retirement. NMG Benefits provides the SmartGate retirement calculation tool, to do exactly that. When using the online tools, an individual provides information about their circumstances, the calculator then shows the projected retirement income, based on the inputted information. “A person’s actual retirement income will depend on the investment performance of the portfolios where their retirement savings are invested,” states Augustus.

Augustus further notes that “people can improve their expected retirement income by saving extra – either as regular amounts, or if they are able to save a lump sum when for example receiving a bonus or 13th cheque. It is likely that the rules of their employer's retirement fund don't require them to contribute as much as they are able claim as a tax deduction, so this is also important to consider.”