Prudential Investment Managers

Prudential Investment Managers

October 2016

3 signs you will be able to retire comfortably

They say that 40 is the new 30; we’re all progressing towards old age with more energy and better health than the generations before us. But, there’s a financial fact you can’t ignore as you successfully hurdle that birthday milestone, you could call it “midlife money crisis”. Suddenly you realise that you only have 20 years of work ahead of you - will you be able to live in the manner to which you’ve become accustomed once you hang up your laptop bag?

If you’ve been sticking to these smart financial strategies, you should have no worries:

#1 You have been prioritising your retirement savings when you get a raise rather than elevating your lifestyle.
While your mate upgraded his Audi to a Q5 when he got that promotion, instead you’ve kept your trusty five-year-old Volvo ticking along. Clever you. The smart thing to do when you get a raise is to re-examine your budget. Are your kids’ school fees going to soar now that they’re off to high school? Does your medical aid need to be upgraded? Once you’ve covered your extra expenses for the year ahead, allocate the remainder of your raise towards your investment portfolio. Even if it’s only an additional R500 a month, the 20 years of compound interest ahead of you takes you one step closer to celebrating your 70th birthday on some exotic island.

#2 You’re happy to delay retirement to give your investments more time to grow.
Because 80 is also the new 70! According to the World Health Organization, 29 countries now have an average life expectancy of 80 years or higher. Your retirement savings may have to cover you into your 90’s thanks to the incredible health innovations being made every day. Delaying your retirement can help you boost your retirement savings in three ways: you’re putting more money in; that larger amount is earning more over time; and you’re preserving what you have already saved by postponing your withdrawals.


#3 You have a diversified portfolio and are taking at least some risk.
Risk and money… well, for many of us they just don’t go well together. But if you invest too conservatively when you are still relatively young, you run the risk that the growth rate of your investments won’t keep pace with inflation. Working with your financial adviser to find a risk level you can live with, and spreading your investments into more than one uniform category, can protect your money from the ups and downs of the markets. By diversifying, you're reducing the risk that one investment that's performed badly will “poison” the rest of your portfolio. At the same time, including higher-risk options like equities and listed property should deliver the inflation-beating returns you need over time.

If you can tick all of these boxes, you should be on your way to building up a very comfortable retirement lifestyle for yourself.

Prudential unit trusts can play an important role in your success: if you aren’t already investing with Prudential, contact your Financial Adviser or our Client Services team on 0860 105 775 or at info@prudential.co.za

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