Tag Archive: Retirement

Retirement

My son asks me the other day, while we’re out having a driving lesson in the forest in my 30-year-old Pajero, that Paul, a mechanic we use, “owns his own business hey, so he could work for as long as he wants to?” And so, I broached the concept of retirement with him.

I explained that someone who is employed will have a contract with their employer that defines the age when they have to leave their job. That this could be 60 or 63 or 65. In this way, I explained, the employer has the ability to reduce or replace staff. I went on to explain that such a person has to then have saved enough money, as they might no longer be able to find another job. But a self-employed person, or someone who owns the business, like Paul, or me, can work for as long as they like, as long as they’re physically able to do what they need to do. Paul must be able to climb under a car or bend over into an engine bay. I need to sit, and walk, and move, and think, and talk. But if our bodies or minds can no longer can do that, we’d also need to have saved enough money to no longer be working.

Modern concepts and life expectancies talk about how the idea of retirement has changed. That people will live longer and work longer. But in reality, most of us reading this that are still working, will be faced with the reality that one day we will either be told to pack our up desk, or we’ll be too frail to work, either physically or mentally. And hence will need money.

Weekly Thoughts 27 October 2016

I’ve had more than a few conversations recently with different folk on the topic of ‘how much money does one need to retire?’ There is not a straight forward answer to this question. If someone has saved, from day one of their working life, 15% of their taxable income and at least another 5% of after tax income and has never spent pension monies between job changes, they will be able to retire on a similar standard of living to what they were accustomed to during their working life. So for a policeman, or a teacher, or another young professional starting out in life, if they apply the above savings plan they will be able to retire on a similar standard of living. Such a person could end up with a fixed pension or maybe investments amounting to 5 or 6 or 7 million Rand, in today’s terms, and retire independently. A side line to this is that we need to arrive at this point in life without any debt and a paid off house.

What one person needs or wants is not another person’s needs. The problem is more around not having saved enough to support the same lifestyle that one has been accustomed to during your working life. Then a person has to cut their cloth to fit their money, whatever that cutting might entail. For some folk it might mean no more overseas trips, for others cutting back to one car if they had two, or no more DSTV or no more private medical aid. And so on.

So how much do you need is not the question. The question is have you saved appropriately during your working life.