Research reveals that just over half of respondents in their 50s have retirement savings, while 20% of them said that their biggest financial worry was being able to retire comfortably.
Chief Marketing Officer at Sanlam, Mariska Oosthuizen, said that when you are in your 50s, retirement is drawing closer and this is the last working decade for many people, making it a very crucial time to give retirement savings a top-up or boost.
“A good rule of thumb is that your income in retirement should be equal to about 75% of your income when working,” Oosthuizen said.
Belinda Sullivan, head of corporate consulting strategy at Alexforbes shares four ways people can give their retirement savings a boost.
1. Additional voluntary contributions
People have the the flexibility to decide how much extra to contribute towards their retirement savings.
They can contribute a lump sum whenever they have extra money and there are generally no administration fees charged for putting extra money into their fund, so the full amount is invested for your retirement.
2. Increase your contribution rate
Sullivan said that contributions to your fund are deducted from your salary before tax.
If people contribute an extra five percent, then their take-home pay will not decrease by five percent because they will pay less tax on the reduced, pre-tax income and more money is invested towards their retirement savings.
Sullivan said: “As a simple example, if your total monthly income is R25,000, and you contribute 15 percent – that is R3,750 – to your retirement, your taxable income is R21,250.
“However, if you increased your contribution to 27.5 percent – that is R6,875 – your taxable income would be R18,125. Your fund may offer you the option to increase your contribution rate.”
3. Sign up for a new retirement annuity
According to Sullivan, people can top up their retirement savings with a retirement annuity. A retirement annuity has its benefits, including tax incentives, flexible contribution rates, and they are separate from employment-related savings.
“Most annuities have a minimum investment amount to get started. You may need to save up, or wait until you receive a bonus or if you receive money back from Sars (SA Revenue Service) when you submit your tax return,” Sullivan said.
4. Draw up a budget
If you think you don’t have any extra money to put towards your retirement savings, then draw up a budget to take a look at your finances to see where you can save money.
“Cancelling subscription services you are not using, or getting new quotes on your insurance can help you find a few extra hundred rand, which could be used in a Tax Free Savings Account,” Sullivan said.
Oosthuizen said that people in their 50s should use this time to work with a financial adviser to get the best possible retirement saving strategy in place.
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