- Leaving paying off your debt until too late
Always try to start paying off your debt from age 45. You should never take any new debt at this age. You should be aiming to be debt free by age 55 so you can rather focus on diverting more funds towards your retirement funds instead of paying bank’s interest. Normally people retire at age 65, you really need that last 10 years to invest heavily on your retirement.
- The norm has always been that your house is a retirement asset.
The idea of people is that they will sell the bigger house and buy a small retirement house. The reality is that smaller homes located in retirement villages are becoming expensive. There are other expenses that must be considered as well, like levies. Don’t include your house as part of your retirement assets.
- Be realistic about the additional expenses.
You will spend more on medical expenses. As we age, our bodies are becoming more prone to being affected by all kinds of illnesses. You will want to explore certain experiences like travelling, outings and so on.
- Take note of income Tax.
You will still pay tax on the income you get even if you are over age 65. There is still some tax savings as Tax threshold increases with age. You will still pay tax on your interest with banks and will still be liable for capital gains.
5.Not planning is a biggest problem.
Work with a reputable Financial Planner. The planner ought to consider additional things like the cashing out of your 1/3rd at retirement, inflation, and all other possible expenses
How inflation works: Investing R5000 p/m over 25 years with an annual increase of 6.5%, Growth of 10% p/a, and Inflation of 6.5% p/a will give you R11 532 297 in Future Value whereas Today’s Value will be R2 388 777. All that means things will become so expensive in that 25 years your R11 532 297 will only buy you things that are worth R2 388 777 in today’s money.
