By Aidan Freswick*
The people who have already retired are the best teachers of how to do it. Here are the lessons I hear from them again and again.
Some of the most useful conversations I have aren't with clients who are planning for retirement. They're with clients who are already there. Ask a retiree what they wish they had known at 35, and you get answers no textbook can give you: what worked, what they regret, and what turned out not to matter at all.
Over the years I've collected these lessons from the retirees I work with. Most of them aren't complicated. The hard part, as they will tell you, is actually sticking to them.
It starts with saving
1. Start now, whatever your age. “The best time to plant a tree was 20 years ago. The second-best time is today.” I've heard a version of this from more retirees than I can count. Time is the one ingredient you can't buy back. Someone who invests R2,000 a month from age 25 and earns 10% a year could have around R12.6 million at 65. Start the same amount at 35 and it's closer to R4.5 million. Ten years' delay costs almost two-thirds of the end result. (Illustrative, nominal figures before fees and tax.)
2. Don't let your lifestyle grow as fast as your salary. One retiree put it simply: “Every time I got a raise, I pretended I didn't.” The bigger car, the bigger bond and the extra holiday all feel deserved. But every rand that goes to lifestyle creep is a rand that isn't working for your future. A good rule of thumb: save at least half of every increase before you get used to spending it.
Then it's about behaviour, not brilliance
3. Spread your bets. “Don't put all your eggs in one basket” sounds like a cliché until you meet someone who held too much of one share, one property or one sector when it went wrong. Diversify across asset classes, and across countries too. South Africa makes up a small fraction of global markets, and a sensible offshore allocation protects you from risks that are specific to home.
4. Don't sell in a panic. The retirees who did best are often the ones who did the least during a crash. “I've lived through more market falls than I can remember. The only ones that hurt me were the ones I reacted to,” one client told me. Selling after a fall turns a temporary paper loss into a permanent real one, and you usually miss the recovery.
5. Invest in a way that lets you sleep. Your portfolio should match your temperament, not your neighbour's. If market news keeps you up at night, you are probably taking more risk than you can live with, and that's exactly when people make bad decisions. Knowing your real risk tolerance, not the one you imagine you have, is worth sitting down with an adviser for.
6. If it sounds too good to be true, it is. “Slow and steady won the race for me,” said one retiree who had watched friends lose savings to schemes promising unusually high, guaranteed returns. High returns always come with high risk. Before you hand money to anyone, check that they are a registered financial services provider on the FSCA website.
7. Review and rebalance. Your life changes, and your portfolio should keep up. Markets also push your mix out of balance over time. Regular reviews keep your risk where you want it and become especially important as you move from building wealth to drawing an income from it.
And it pays to plan properly
8. Let the tax rules work for you. “I only realised late how much tax I'd been giving away,” one retiree admitted. Retirement annuity contributions are tax-deductible within SARS limits, and tax-free savings accounts let your growth compound with no tax at all. Endowments can also help, mainly if your marginal tax rate is above 30%. And under the two-pot system, think hard before dipping into your savings pot: withdrawals are taxed at your marginal rate and leave less for later.
9. Get help. “Taking advice was one of the best decisions I made,” a client reflected. Retirement planning involves tax, investments, estate planning and income decisions that interact with each other. A qualified adviser helps you see the whole picture and, just as importantly, helps you stay on course when markets test your nerve.
10. Plan for healthcare costs. This is the lesson retirees most often wish they had taken seriously sooner. Medical inflation in South Africa tends to run ahead of general inflation, and frail care or home nursing can be very expensive. Keep your medical aid and gap cover going into retirement and build these costs into your plan rather than hoping they won't arise.
11. Remember what it's for. “The money was never the goal. The life was,” said one retiree who now spends a good part of the year travelling. Get clear on what you want retirement to look like: time with grandchildren, travel, a new business, a long-postponed hobby. A plan built around a picture you care about is much easier to stick to.
The common thread
None of these lessons depends on picking the right share or timing the market. They're about discipline, patience and having a plan you understand. Every retiree's journey is different, but the ones who are happiest with where they've landed tend to have followed most of these principles for a long time.
If you're not sure where you stand, a conversation with a financial adviser is a good place to start. Your future self will be grateful you did.
*Aidan Freswick, Registered Financial Practitioner™ , is based at Brenthurst Wealth Belville aidan@brenthurstwealth.co.za
