Starting your retirement savings is as much a mental battle as it is a financial one. Read up on how your excuses may be holding you back.
… I don’t have enough money.
… I prefer to live for today.
Whatever your excuse is for not saving for retirement, you may very well find that you are stuck in a self-fulfilling belief: I think it’s true, therefore it is true. Confronting your mental barriers to saving for retirement is your first (and most difficult) investment.
To help you take the first steps towards making your future a priority it helps to understand why saving for retirement makes sense – even when you think you can’t. You may not be in a position to start saving immediately, but mentally preparing yourself can make the process easier when you have the income to save.
…the future needs to look after itself; I’ll cross that bridge when I come to it
The idea of living for today and letting the future take care of itself is one for the romantics, but the reality of relying on handouts from your family and / or the state is the less romantic consequence. A useful exercise is to think of how you feel asking your parents, partner or the bank for money. Trepidation? Dread? Fear? Now imagine having to do this every month just to keep yourself afloat.
All of this is not to say that you must abandon your present needs. Rather balance your allocation between today and tomorrow. After all, if you don’t look after yourself – who will?
…I don’t have enough money to save
Sometimes you really don’t have money to dedicate to retirement saving, but there are many of us who simply aren’t budgeting at all. With a budget you can confront the wasteful part of your spending and you might find that it reveals pockets of money that could be used better. It may be that you still do not have enough money to save for retirement, but a budget can help you see your finances for what they are and plan towards a time when you may have enough disposable income to start saving.
You can start with as little as R500 per month by giving up a pair of shoes, one fancy dinner or even your daily coffee habit.
…I need to take care of family members
A different way of looking at this is that part of taking care of your family is taking care of yourself: who will take care of them when you can’t take care of yourself?
Many people today are stuck in a sandwich between their children’s needs and their parents’ retirement needs. Breaking free of this cycle requires that those of us in the middle consider and plan for our own futures – to avoid being dependent on our children in the future and continuing the cycle.
…I don’t trust company schemes
You don’t have to.
With the availability of several product options you no longer have to rely on your employer to maintain your retirement savings plan. Unit trust-linked retirement annuities allow you to manage your retirement on your own: choose the unit trusts you want in your portfolio, stop and start your investments as your circumstances change and you cut out the middleman (your employer).
If you are part of a group retirement annuity, which employers take out on behalf of their employees, you are actually an individual member in your own right. Even though your employer facilitates payments, you are the ultimate owner and, if you resign, you can continue with your plan.
…how do I know my investment manager will be around decades from now when I retire?
Your retirement savings are held in trust, which means that your retirement savings do not form part of the assets of your investment manager and will remain safe even if your manager goes out of business. Additionally, retirement funds are overseen by a board of trustees, some of whom are required to be independent. The duty of trustees is to ensure that the retirement fund acts in the best interest of its members.
…it’s just too much work
It’s no more work than opening a bank account. In some cases even less: in five steps you can open your own retirement annuity with Allan Gray. And once you have an account, you can manage your investments easily through your online account.
…I don’t know where to start
As with most things, it seems daunting until you get into it. If you are unsure about what investments are right for you, you don’t have to do it alone. An independent financial adviser can help you work out a plan that works for you.