The Secret: Retirement Without Stress
When your values are clear, your decisions are easy." - Roy Disney
The decisions you make about retirement aren't only tied to your values but they also tend to be irreversible decisions. Retirement should be well thought out and properly planned. If you begin by considering what is most important to you, it will make your retirement much easier.
Planning also determines your level of satisfaction with the lifestyle you'd prefer during retirement. Financial plans are crucial as they will identify your income, expenses and establish your budget for retirement.
The most common and well intended advice on retirement is to start saving as soon as you can and possibly, when you begin earning paychecks. That's simply because the sooner you begin saving, the more time your money has to grow.
It's never too early to start saving for your retirement.
A few things to consider as you contemplate retirement and how much money you want to save:
1. What do you have in mind for your retirement?
Will your life continue to be the same as it is currently? Do you want to retire early? Do you want a higher or lower standard of living? Here, there's no right or wrong answer and the idea here is that it's personal. However, the lifestyle you anticipate is critical to answer the question of how much you want to save.
2. What is your current income?
This is a useful starting point to calculate your retirement planning savings needs. It is highly probable that if you make more, you'll want to save more for retirement because of the lifestyle you probably desire to maintain or improve. However, it also may help if you consider being frugal
3. How much will you collect periodically? What are the designed benefits?
Have a good estimate of the monthly payments as these will help you determine what savings you need. The retirement funding options include pension funds, provident funds and retirement annuity funds.
Retirement annuities - These are set up for the benefit of an individual who is self-employed or whose employer does not offer a work place fund. One cannot receive benefits before the age of 55. The individual receives regular income upon retirement or a lump sum benefit to their dependents upon death. Benefits can be transferred from one retirement annuity fund to another.
Often, retirement annuities are used as a vehicle for retirement savings by self-employed people and those wishing to make an additional provision for their retirement.
A person makes contributions to the retirement annuity before retirement. These contributions are tax deductible up to a limit. The accumulated amount is then used to pay the individual regular pension amounts or a combination of regular pension and a cash lump sum. Notably, the individual can only take up to a maximum of one third of their pension benefits as a lump sum. It is compulsory to buy an annuity with the remaining amount.
Pension Funds - These are set up by an employer for the benefit of employees upon their retirement. A pension fund may also provide other risk benefits such as death and disability benefits.
The employer makes contributions and the employee may also contribute to the fund. The contributions are tax deductible. The accumulated amount (upon retirement or withdrawal from the fund) is then used to pay the individual, either a regular pension amount or a combination of regular pension and a cash lump sum.
The regular pension amounts paid may be increased to cushion the effects of rising prices on the purchasing power of the pension.
When the payments begin, up to one third of the value of the fund benefit may be taken in cash and the balance taken as regular pension payment.
Provident Funds - These are set up by an employer for the employees' benefit and the employees may choose how to use their lump sum upon retirement or withdrawal from the fund. This fund may also provide death and disability benefits.
As the employer contributes, the employee may also choose to contribute. However, contributions by the employer are tax deductible and employee contributions are not. Employees are entitled to their full benefit as cash minus the tax payable.
The individual may choose to purchase an annuity with part or all their benefit.
4. When do you expect to retire?
If you want to retire young or early, then you'll need to save more before you do because you'll be retired for a longer period of time. However, those who wait longer have time to save because they'll work more years and may choose how much to save at the time.
5. How will you invest?
The higher the risk, the higher the return. However, a wise man thinks ahead; a fool doesn't, and even brags about it!
So how much have you saved? How old are you now and what are you looking for? How much do you want to save?
Retirement is a golden time in your life. After years of hard work, retirement is finally time to relax and enjoy everything around you. This is your time, but as with everything you do during your active years, you need to make financial provision and plan for your future.
You need to "Boresha Maisha" and plan for retirement. A good, renowned insurance company such as Liberty Life can help you by providing flexibility to structure your plan according to your investment and risk requirements.
About Liberty Life
Liberty Kenya Holdings is a subsidiary of Liberty Holdings, an established and growing Pan-African financial services group that is listed on the JSE in South Africa and ultimately controlled by Standard Bank. Liberty Holdings has a growing footprint in 17 African countries, offering asset management, life insurance, short-term insurance, health cover and pension solutions and health solutions that meet the changing financial, investment and lifestyle risk needs of both the retail and corporate markets. Our vision is to be the trusted leader in insurance and investment in Africa and other chosen markets.
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