As a young earner starting out in your career, retirement seems a million miles away. But there’s a simple truth to building those long-term dreams and comforts for when you’re older. Starting today means getting ahead, and importantly, making the most of your earning potential.
Prioritising good savings habits comes with its challenges. Financial responsibilities like paying back student loans, coupled with the high cost of living is tough to say the least.
Financial adviser, Katie Smit says, ‘Retirement Annuities and tax-free savings accounts are just two examples of how you can save efficiently for the future and which can add great value to one’s financial planning.’
Let’s take a look at an example to demonstrate this. If you opened a Retirement Annuity at the age of 25 and put away R300 every month into that Retirement Annuity, you will accumulate R3,289,402 by the age of 65. And if you delay this by only 10 years and start saving at the age of 35, your investment will reduce by a massive R2,188,414.1
Smit adds, ‘Remember that every rand you save and invest today will grow with compound interest for you to use in the future.’ It’s much like the Confucius saying: ‘The man who moves mountains begins by carrying away small stones.’ So, set yourself achievable goals, remain consistent, and persevere. Even if it’s R50 a month, start today!
But you can’t think about saving for retirement in isolation to the rest of your financial planning. What would happen if you got sick or had an accident, and couldn’t work – even for just a few weeks? How would you pay your monthly RA premiums? That’s why income protection is equally important from the minute you start your first job. The one has a domino effect on the other.
You’re probably thinking: I can’t afford it, I don’t believe I will ever be too sick to work, or it’ll never happen to me. But in reality, the chances of you having some kind of injury or illness that will prevent you from working is probably higher than you think. Life insurer, FMI (a Division of Bidvest Life Ltd) claim stats reveal that 7 out of 10 people will have at least one injury or illness in their working lives that will prevent them from earning an income.
Good news! Income protection is surprisingly affordable, especially when you’re young. For example, a 30-year can insure 100% of their income for less than a daily cappuccino.2
Think of income protection as the freedom you need to live your best life. Not only will it pay your RA contributions should you get sick or injured and cannot work, but it’ll also take care of all your other monthly financial commitments like rent, petrol and cell phone bills.
It’s time you invest in YOU, and insure your ability to earn that monthly income before anything else – so you can live the life you’ve planned not only for tomorrow, but 30 years from now.
16% RA contribution increases and assumed RA growth rate of 10%
2FMI Quote Calculator at www.fmi.co.za