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The market hasn’t shown any real growth over the past five years and even the most optimistic investors are starting to panic, particularly those who have retired, says Schalk Louw, a portfolio manager at PSG Wealth.

With the cost of living rising rapidly, many pensioners are forced to increase their withdrawal rates to well above the recommended levels, in an environment that hasn’t provided sufficient growth to sustain such high withdrawal rates, says Louw.

“Aside from comments from the retirees I work with daily, enough research has been done over the years to determine what retirees would have done differently, given the opportunity to start over. It will come as no surprise that most of them claimed that they would have saved more and would have obtained proper advice well before retirement, if they got a second chance.

“Despite these observations, I still get the impression that most people don’t realise how important it is to save as much as possible before retirement, even when times are tough,” says Louw.

He has the following advice:

* Control your expenses. Many individuals who find it difficult to make ends meet on their current income take on extra work to earn an additional income. Yet these individuals still struggle to save, even with a higher income, says Louw. The key is to find out exactly what you are spending your money on, and the only way you’re going to do that is by drafting a strict budget to monitor your expenses. Once you know what you’re spending your money on, you can control your expenses, says Louw.

One of the biggest reasons South Africans are struggling to save is because they live above their means. You need to buy cheaper and smarter, says Louw. If you cannot afford a TV package, downgrade or cancel your subscription. Also, avoid any additional debt that may obstruct your road to financial freedom.

* Make saving non-negotiable. Make saving a non-negotiable part of your routine, rather than a decision you have to opt into every time, says Louw. Set up a monthly debit order for a fixed deposit, unit trust or an endowment policy, and make sure the debit goes off right after pay day. This will leave less money available to spend, forcing you to live more frugally.

* Claim your taxes. Many people make the mistake of overlooking the tax benefits offered by some savings products, says Louw.

Make sure that, if you invest in a retirement product, you include those certificates with your tax submissions every year. You can deduct up to 27.5 percent (up to R350 000) of the greater of your taxable income or remuneration per year by saving in a retirement product.

Also, use any tax returns paid back to you to contribute to your savings, whether it comes from your retirement annuity or unpaid medical claims.

* Consider the future. If you need a reminder about why saving is critical, ask yourself whether you’d be able to live on R1780 a month. That’s the government pension grant for people over 60, which goes up by R20 for those over age of 75. “Learn from the mistakes of those who came before you. Don’t give away your power by living above your means. Challenge yourself by saving as much as you can to ensure that you can have a more comfortable and financially sound retirement,” says Louw. 

PERSONAL FINANCE