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Start planning for your retirement now!

Nobody likes to think about retirement planning. Young women feel that they have all the time in the world to start worrying about their golden years. More mature women probably have a whole lot of other financial commitments like bond repayments and school fees to worry about. And older women well, older women have probably started to worry about their retirement, but by then, it is often too late.

The problem, as Ricky Rohrbeck, a financial advisor at SI Advisors, explains, is that most businesses now use a cost to company model for paying their staff. This means that everything that a company used to do for you, you now have to do for yourself. The chances that you are choosing to allocate 15% of your salary to a retirement plan are pretty slim, aren't they?

Get an early start
Unfortunately, Rohrbeck says most people underestimate the importance of getting an early start on retirement savings. If you think you will need R10 000 a month in today's terms after retirement, and you start saving at 30, work until you are 60 and live until you are 80, you'll need R10 000 a month for the 240 months after you retire. That means you have 30 years to save R2 400 000 or R6 700 a month. That's a frightening amount of money that you should be putting away. However, if you'd started in your 20s, you'd have to put away
R5 000 a month, which is a little more manageable.

Of course, this calculation should take into account compound interest (the interest you earn on the interest you've earned), inflation and investment returns, which is why it's important to speak to a financial advisor to get a clear picture.

Expenses you won't have
It's not all gloom and doom, though. There are some expenses that you probably won't have when you retire. By then, your children should be out of school and financially independent. You should own your own home, and can possibly even downsize (although smaller apartments often have higher levies). You won't be paying for a medical aid for your whole family, and can probably downgrade your cover to a good hospital plan.

It's also worth remembering that many women have second careers after retirement. You could continue with your current career part time or open a small business, so your income won't necessarily come to an abrupt halt on the day of your retirement.

Where to invest
The next thing to consider is how to invest your retirement savings. It's very important that you invest in a designated retirement annuity, because then the money that you put aside will be tax deductible. This means that you won't pay tax on the portion of your income that you save for your retirement, which is a big bonus.

The retirement annuity you invest in should get you around 3% more in returns than annual inflation rate, so that your money grows as you invest it. A financial advisor can recommend which retirement annuity you should invest in. Remember that retirement annuities are never going to offer you whopping returns; just slow, steady, inflation-beating growth.

The bottom line
The single most important thing to do about your retirement is to start saving early. Now. Right away. Yesterday. And as much as you can. You owe it to your future self to deny yourself some luxuries now to make sure that you can enjoy your old age free from financial worries.

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