Fast facts

An average person will need approximately 70% of pre-retirement income to maintain the same standard of living after they stop working.

An average person will likely spend about one third (1/3) of their life in retirement.

Why do we save for retirement?

• We don’t know how long we will live – If we live longer than expected and retirement money does not last that long it may lead to financial problems

• We don’t know for how long we will be able to work – It is common for people to retire earlier than expected as a result of health problems or being laid off from the company they worked for.  It is harder to find another job when you are nearing retirement.

• We want to have enough money for a comfortable retirement – Unfortunately the amount of money contributed by the employer for retirement is never enough to even provide for the basics.  And the assumption that expenses will go down during retirement is not usually true and with inflation it means more money will be needed.  In addition other expenses may arise such as providing financial help for dependant children or grandchildren and parents, increased medical costs and rising health insurance premium costs.

Factors that may affect how much money is available at retirement

• Paying for children’s education - Paying for children’s education expenses (college education) greatly reduces the funds available for saving and investing for retirement. 

• Time - Starting to save and invest early in a career provides a great head start.  The more time there is from the start of the retirement savings plan to the time of retirement the more funds will be available.

• Rate of return – Selecting an investment with a higher rate of return increases funds available at retirement.  It is important also to remember that higher rates of return mean a higher investment risk.  The tradeoff in this case is that when the retirement date is still far away it is possible to take a risk.  The best way to minimize investment risk and maximize investment returns is to diversify. 

• How much you contribute – The amount that each employee contributes to supplement what the employer contributes makes a big difference on how much money will be available after retirement.  Supplemental retirement money can be invested through the supplemental retirement program available where the employer contributions are sent such as the PPF (Parastatal Pension Fund) fund.

How to start saving for retirement

• Start planning for retirement now - Experts recommend to start saving for retirement as early as possible.  In this case it makes sense to start saving for Retirement on the same month that Employment begins.  What do you think?

• Set aside a specified percentage of income - If every month a certain specified percentage of income no matter how small is set aside and then invested it will accumulate over the years.  The best way is always to do so before other expenses start coming in because then it will be more difficult to try and keep from spending that money.  If it is possible to open an account with a bank that will allow direct deposit of money from the employer that will be the best option.

• Keep it up - Consistency is another key to a successful retirement savings plan.  No matter how hard it gets regular savings for retirement should be kept going.  Of course exceptions are made in life or death types of situations but what is important is to maintain the discipline.  See our Financial Planning articles for tips on how to plan for all financial matters. 

• Find information about available options - There are currently a number of options that are fit for retirement savings.  It is important to do enough research to find out which options are right for you.  See our Retirement Planning article.