The word “retire” was borrowed from the French language. They used it in the military during the 16th century to indicate a time when soldiers needed to “withdraw to a place of safety or seclusion”, after their service in the military.
The term retirement for us in Namibia means that we withdraw from formal employment and will not receive a regular income – until we die. This implies that we need to make provision for a time like this, while we are still able to earn a monthly income.
The question should be asked: Will there be enough funds to sustain me for the rest of my life when it is my time to withdraw to my place of safety? This is a very relevant question because the life expectancy of the world population has increased significantly over the last number of years due to improved healthcare. There is thus a high likelihood that many retirees would live well beyond their retirement date.
So, how do we make provision for the years when there is no regular income from an employer? One of the hardest parts of retirement savings is to put yourself in the shoes of a 60- or 70-year-old person while you are still in your 20s? It sounds very far in the future and one cannot imagine having to save money now that will only be used after 40 or 50 years.
There is so much uncertainty – so many what ifs – like, what if I do not get to retirement age? What if I cannot save money anymore? Life is indeed uncertain, but with proper retirement planning and advice, it is possible to overcome some degree of uncertainty and the fear of the future, and plan for the day when you will retire from active work. The main purpose of a retirement savings is to ensure regular income for the day when you choose to retire from formal employment. There are also a number of other benefits of a retirement savings.
These are:
- Various tax incentives and protections for pension fund savings that are implemented by Government. The retirement contributions and investment gains are not taxed until the time of retirement.
- Small contributions made on a regular basis will earn interest and can grow to significant retirement savings to enable you to live a self-sufficient life for many years. In the past, the children would look after their parents but this phenomenon is rapidly disappearing, and older people are more and more reliant on their own savings and funds accumulated over the years to sustain themselves.
- It provides a financial buffer in the event of a company redundancy or retrenchment.
Anyone can dream of enjoying a carefree retirement, but it will only be possible if you have saved sufficient funds to enable you to live an independent and comfortable life. The level of comfort will depend on the amount of savings that you have accumulated over your working-life years. There are many risks and uncertainties associated with retirement, such as inability to work due to illness. It is therefore of utmost importance to prepare for retirement as early as possible.
Family commitments, such as children’s education, home loans and car loan repayments in later years might hamper the ability to contribute large amounts towards retirement, therefore it is essential to start with savings as early as possible.
In conclusion let us take a quick look at some of the myths of retirement:
- The Government Pension will be sufficient to sustain me after retirement: This is a very common assumption by many people that they will be able to survive on the old-age pension grant from Government. The current monthly pay-out from Government is currently N$1 300. This is hardly enough to buy food for the month, let alone other expenses such as water, electricity … and the list goes on.
- I will work through my retirement until I die: If you work through retirement, it should be because you want to and not because you have to. The strength to work weakens, and health also inevitably deteriorates with age. There is therefore no guarantee that one will be able to work after retirement.
- It is too late for me save for retirement: There is still time to grow your retirement savings no matter how close you are to retirement. The saying goes – rather late than never – so, rather have a little savings to help you through retirement than absolutely nothing.
Ernie Zelinski says: “Retirement is a time to experience a fulfilling life derived from many enjoyable and rewarding activities”. Whatever you decide to do, I hope and pray that your retirement is what you dreamed about and that it is a time to not worry about finances – let us make the decision today to save for retirement.
*Patricia Olivier is Corporate Segment Managing Director Old Mutual Namibia
