The key to a good retirement is to educate yourself early on. Here are our three top tips to ensure a stress-free retirement one day.

Start Early

It’s what you’ve heard time and time again, but that’s because it’s true. Making up lost ground on retirement plans is hard, so start as early as you can even if it means putting away R100 per month. Over time the sum will grow, you’ll be in the habit of contributing and can increase it, and compound interest will mean that your small sacrifice all those years ago will pay off in the long run.

Of course, being late to start saving for your retirement doesn’t mean that you should give up and not bother. You can still make sure you have a healthy sum available to you to enjoy your retired years, but you may have to be more astute in your planning.

Set Realistic Expectations             

What do you want for your retirement, and when? It’s important to know what kind of retirement you’re planning on so that you can make provisions accordingly. It doesn’t actually matter what your expectations are, as long as they’re realistic.

Do you want to stay in your current home and live comfortably but not extravagantly? Are you confident that when you retire you’ll be frugal with your money? Or do you envision retirement as plenty of travelling, golfing, dining out and enjoying the fruits of your last 40 years of labour?

If you want to retire at 55 then you’ll need to save significantly more than the recommended 10-15% of your income, and you’ll probably need to net yourself a fairly high-paying job. There’s no point in planning a lavish retirement with boats and holidays if you’re struggling to get by and barely putting anything away for the future. Conversely, if you’re banking on keeping your costs low, it’s important to make sure that you’re not overestimating your ability to cut costs when you’re retired.

Work Out Your Needs

A good rule of thumb is to bank on needing a monthly income in retirement which is 80% of your current income – but if you currently spend only 25% of your monthly income, you could probably adjust that downwards.

Obviously, if you spend 100% and still struggle to make ends meet, you can probably assume that you’ll need at least what you’re spending now as a monthly income; you’re likely to have fewer costs in some areas (such as a bond or dependent children) but increased ones in areas such as healthcare.

After you’ve figured out your annual financial needs, multiply by 25 to account for the years that you’ll likely spend retired. So, if you need R10 000 per month:

10 000 x 12 = 120 000 per year

120 000 x 25 = 3 million

The three million would be what you’d need to be completely comfortable for your retirement. It sounds like a huge amount, but remember that thanks to compound interest and a long savings period, it’s more than doable. After all, you’ll have been saving for around 40 years by the time you retire! If you have other income, such as rental income or government grants, you can subtract this from the total amount you’d need to save.