Most South Africans don't know how much time is left before they retire. They don't have a financial plan in place to settle their debts and start investing. Unfortunately, the majority of income earners will have to seriously downgrade their lifestyles when regular income stops coming in.
Liberty financial adviser Phillip Kassel says heavily indebted income earners need to be debt-free by the time they retire. Kassel says, "Most employees earn approximately 480 pay cheques in their working lifetime between the ages of 25 to 65. The average person can expect to live until at least 85. This means they need to use these limited pay cheques to fund a retirement income of at least 240 months. At this rate it is hard enough to meet basic day-to-day expenses in retirement without being saddled with debt repayments – so any successful retirement savings strategy must include a debt repayment plan."Ideally, all debt should be cleared by age 45. This allows enough time to boost your retirement fund contributions instead of paying interest over to the bank. In the worst-case scenario, the aim should be to have no debt by the age of 60. This means that, from at least the age of 45, debt repayments should be a top priority.
Kassel says you need to bear the following in mind if you are aiming for a comfortable retirement:
1. A home loan shouldn't be an ATM