50 and still haven’t saved? Here’s how to kickstart your retirement plan today

You can start saving for retirement at 50 if for some reason you left this important part of your financial health so late. While you should start saving for retirement the first month you start working, you can still make a late life retirement savings plan.

The research show that by the ages of 45 to 49, 63% have a plan to save for retirement. Sheila-ann Robey, a certified financial planner at Liberty, says this shows that South Africans become financially wiser as they get older, but it also indicates that many people are setting up their savings plans later in life.

She uses these two people as an example to explain how life can happen and keep you from saving for retirement:

• When Nandi and her husband found themselves in the unexpected, but happy, situation of having two children in their late twenties, she decided to give up her teaching job to be a full-time mom. Now at 50, with the children out of the house, she returned to teaching but wants to save for a meaningful pension to ensure that she and her husband can travel the world when they both decide to retire.
• At the age of 28, John had a successful office renovation business. He never bothered to save for retirement because he enjoyed his job and had all his spare cash invested in a house. He expected to work in the business until his sixties and then sell it. But by the age of 50 he realised he did not want to continue working at the same pace. In fact, he wanted to explore other paths in life that bought him more personal satisfaction. He also realised his business was under pressure from newer competitors and that he would not be able to sell it for what he planned. He needed to rethink his retirement plans.

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It is not too late to start saving for retirement

Robey says the good news for Nadi and John and other people who left saving for retirement until later in life, is that you can start saving for retirement at any time. “There are many ways to approach this, but speaking to a financial adviser would be a good start.

“In both these cases the reality is that the timeframe for saving is dramatically shortened and therefore you have to save as much as 30% or more of your earnings every month if you can.

“At later stages in life many people find they are in established jobs, the children have grown up and their home loans are maybe somewhat less. Therefore, the ability to find extra cash is really possible if you look hard enough at your spending.”

However, you have to motivate yourself, she says. “To save diligently like this you should keep reminding yourself of the retirement you want. Maybe you just want to relax, maybe you want to travel, or even pursue a passion project. Work towards these dreams by putting money away. Make it your reality in the present.”  

There are many advantages of retirement savings and it is important to realise that saving using retirement products has real advantages compared to other types of savings vehicles.

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Saving for retirement in a retirement annuity

Nosipho Nhleko, lead specialist for Retail Investment Proposition at Liberty, says saving in an approved retirement fund such as a Retirement Annuity (RA) gives you significant tax breaks as your contributions are tax deductible within certain generous limits.

Additionally, your money will grow tax-free in the RA and when you retire, up to R550 000 of the lump sum you take may be tax free with the balance of the lump sum taxed in terms of preferential tax tables. Your annuities or retirement income will be taxable at your marginal tax rate in the same way that your current salary is taxed.

RAs allow you to boost your savings above the amount you contribute towards the pension or provident fund you have with your employer. There are no limits to what you can contribute, Nhleko says.

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Where do you start?

Nhleko says getting financial advice will help immensely, because everybody’s situation is unique. “As Nandi’s and John’s stories show, despite our vastly different life situations and ambitions, we all need a retirement plan.

“Of course, retirement is also different for everyone, despite the financial instruments being similar. You can still achieve your dreams even if it feels like it is too late in life.

“Finding a way to create a late life retirement savings plan starts with getting the right advice. These are both typical cases of ordinary working people trying to figure out a retirement plan later in life. You can be certain that life changes for all of us along the way.”