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Private Portfolio – How long is your piece of string?

This week I had to deal with a client who resigned from her job and so also gave up her membership of the pension fund at work. Then, a couple of days later I had a meeting with a client whom we retired from his pension fund a few years ago.
Client One who resigned had the intelligent foresight to preserve her benefit in the pension fund by having it transferred to a retirement annuity for her retirement. Something she will never regret.
Client Two invested the two-thirds portion of his retirement benefit from the pension fund in a well-balanced investment portfolio and even after taking 10% per year as a pension income, the balance of his investment is still more than what he invested.
A lot of people often ask how much money they should save up for their retirement. You may as well ask how long a piece of string is, because the answer will differ from person to person.
Unless you have been born into great wealth and never had to worry where your next plate of food would come from, you are more likely to underestimate the unique financial predicament that so many people have to face after they have retired. Especially if employment policies at your company force you  to retire in the year that you turn sixty. like most members of pension funds have to. In such a case, you do not have the option to chose to stay employed for longer, at least not with that particular employer.
To know how long your string must be will depend firstly on the lifestyle you are accustomed to and how much debt you have when you retire.
The answer will now also depend of how long you are going to live after your retirement. Nowadays people tend to live a lot longer because of better medical technology and more effective medical care.
This can be good or bad news, depending on how much you have saved up for your retirement and what sort of medical aid benefits you have.
You can roughly calculate on getting a monthly after-tax income of N$5,000 for every N$1 million you have invested.
To have to invest around N$1 million only to generate the income necessary to pay your medication and the monthly premium for your membership of the medical aid scheme is not unheard of. This investment amount is getting more and more as medical aid premiums increase every year.
Inflation is the other monster messing around with your hard-earned pension income. If your monthly pension does not increase every year you better have a few million extra in hand to offset the impact of inflation after your date of retirement.
So, from what I mentioned above (and there are many more factors that have an impact on your situation as a pensioner) you may be in a better position to measure your personal string.
Whatever the length you measure, add a meter or two for safety sake and do not think that any dollar that you do not save for your retirement, will not matter. Each one is going to make a difference!
One way of making sure you need a smaller fortune at retirement to survive is by paying your debt as quickly as possible. Ultimately when you retire you should have no debt at all because you will quite likely not have the money to service your debt and at the same time  maintain the lifestyle you got used to while you were earning an income.
In conclusion I would say that it is a blessing to be able to die while you still have a life, and very smart to have a pension income  adequate to maintain the kind of lifestyle necessary to remain a happy camper.

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