Five tips that will help you plan a long-term savings strategy for your retirement
Investing isn’t a sprint; it’s not even a race. Planning and saving for your retirement is more like a marathon. Both require a long-term strategy and ongoing preparation, flexibility and persistence. Whether it’s the sweet reward of crossing the finish line or retiring comfortably in Franschhoek, to reach your destination you need to have a plan and stick to it.
Following a plan takes patience says Peter Nieuwoudt CFP ® of Consolidated Wealth and this is essential for creating a stable financial foundation for retirement. “Any successful athlete will tell you that you don’t become a champion overnight. It takes years of planning and hard work,” Peter explains. “This same long-term approach should be used when it comes to saving for your retirement. You need to focus on cultivating the discipline and persistence necessary to achieve your financial goals.”
Peter uses the context of marathon running to explain his top five tips for retirement planning:
1. It starts with a Plan
You can’t wake up one day and run a marathon. You need a strategic plan that starts with a realistic assessment of your current fitness as well as your level of commitment. From this, you will compile a training schedule that has measurable benchmarks along the way. Similarly, retirement planning also demands a careful look at your wants, needs, aspirations and resources. Using interactive financial modelling, you can stress test the assumptions made in the planning stages and continuously measure the extent of the commitment required.
2. If you want results, work with a Coach
Very few people achieve their marathon goals alone. Behind every Bruce Fordyce or David Gatebe there was a highly qualified coach working on the grand plan, encouraging, motivating and constantly reassessing the situation. Your financial advisor is your personal trainer – they see the bigger picture, focus on the long-term goals and do the research. As your needs change and unforeseen circumstances arise, they are there to review your investments to keep you on track.
3. The all-important timeline
Realistic timelines are critical. Just as runners have to build up distance over time to avoid injury and fatigue, it’s the same with retirement savings. You need to have a timeline in mind as this lets you break down your savings strategy into components. If you have 25 years until you retire, you may choose to take more risks by venturing into volatile investments. If however, you only have five years left until you retire, you don’t want to take as many risks. It’s all about the timeline.
4. Maintaining a Steady Pace
In a marathon, pace is everything. If you run fast in the beginning, you may burn out towards the end. If you are too slow at the start, you may battle to find your rhythm. The same is true when you are saving for retirement. You should start small and as you are promoted and your earnings increase, your savings can also increase, slowly but surely moving you towards the final target. Focus on keeping a steady pace and having a systematic savings plan.
5. It’s about overall fitness
Training for a marathon requires an all-round approach to fitness. You will cover short distances quickly to increase speed whereas hill training strengthens your legs. Likewise in the financial arena, the key to long term results is to take an all-round approach. Markets can be volatile and past performance is no indicator of future success so to balance out these peaks and troughs, the best approach is to invest in a diversified portfolio.
Whether it’s running a marathon or retirement planning, Peter says that you have to be committed to the process. Your goals will keep you going and this is where your financial adviser will add tremendous value: “Very few of us have the self-motivation to complete the course alone. Your adviser has the expertise to be your conscience and your guide as you run the course, overcome the obstacles and stick it out for the long run, ensuring that you can achieve all your retirement goals.”