Will your monthly pension be sufficient?

Use your skills in retirement to earn more money

A number of workers struggle during their working years, only to find in retirement that the difficulties have worsened, as their retirement income is much lower than their pre-retirement income.

An alarming number of these retirees have worked 40 hours a week for 40 years and are retiring at 40% of their income, only to find that their pension is not enough. With rising inflation, some retirees are struggling to cope.

The key, however, for adult employees is to contribute a maximum of 20 percent of their income to their pension fund and start early. In addition, working adults should invest to supplement their retirement income to fight inflation and ensure financial freedom. For employees who are unable to make maximum contributions to a pension plan, be encouraged; continue to contribute to the pension plan, but supplement your contributions by investing. Having a diversified investment fund of stocks and bonds minimizes risk and offers above-average returns. The longer the funds remain invested, the higher the return on your investment. Invest in assets that are rising in value, such as stocks, bonds and real estate.

Recently, a teacher visited me to discuss her retirement plans. She lamented the cases of teachers retiring without adequate retirement income and experiencing financial hardship after working for many years in the public sector. Her resolution is not to suffer the same fate, which is why an action plan has been designed for her, incorporating a diversification strategy. The funds are reserved for short-term goals and emergencies, while investing in a diversified long-term equity portfolio. Having a payroll deduction system in place ensures that regular monthly payments are made on his investments for greater growth of his assets.

The importance of time

Be intentional about your future

Understand that it’s not how much you earn, but how much you save, how often, and for how long. Too often people put off saving for retirement because they believe they have plenty of time or can make up for lost time. But there is no magic wand that will yield instant and lasting wealth. You cannot make up for lost time. Lost time cannot be recovered. It’s what you do with the time you have now that counts. Time is an asset; it is necessary to make your money grow. Compound interest needs time to create sustained growth in your investments. The investment vehicle that will take you to your destination is also important. It was motivational speaker Les Brown who said, “There is no secret to success, there is only one system to success. The question is: are you saving or investing in the right system?

Investing after retirement

Saving and investing shouldn’t stop when you retire because your bills never pay for themselves. Medical bills, home renovations and maintenance costs are likely to increase in retirement. Inflation is a constant threat to your money. It never goes away and robs your pension income of its purchasing power. Ongoing investments after retirement are necessary to counter the effects of inflation. Some retirees regularly save part of their pension in an investment vehicle to ensure that they don’t outlive their retirement money. Having a good habit of saving before retirement makes it easier to be prudent during the retirement years. A healthy 65-year-old retiree is likely to spend another 25 to 30 years in retirement. Your money should survive you.

Income stream

Working adults should consider building pre-retirement income streams. Research shows that retirees who have streams of income enjoy financial freedom and build wealth. But how can working adults create income streams?

Have a part-time job, while working full-time. There are employers who are looking for temporary workers or freelancers. But why not create your own income? Use your skills to generate income. The Internet is a minefield of opportunity. Also, invest in stocks for the long term. The stock market has its ups and downs, but it has proven for centuries to create wealth and financial freedom for many who are patient and persistent. It provides passive income while you sleep. Real estate is another asset that will provide continued income in retirement.

Your retirement years can bring you peace of mind, but they have to be designed – you don’t get there by default. Be intentional about your future. A qualified and knowledgeable financial advisor can guide you through your retirement journey.

Grace G McLean is a Financial Advisor at BPM Financial Limited. Contact her at [email protected] and go to the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. Email him at [email protected]

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