Retirement lies waiting for all. It is a stage in life that can only be avoided by early death, which is not the option most people will go for.
You might have probably envisioned your dream retirement, relaxing on the patio of a beach house, taking trips across countries, sipping cocktails on a beach, among others. Like many, if not all people, you do not want to work until you die and most certainly would want to live and have a comfortable retirement.
To enjoy this retirement dream requires financial planning. But even with a financial plan, how do you ensure your pension is adequate? How do you bridge the gap between your working and retirement income? Yaw Korankye, a pension expert, in a webinar organised by Ghana Talk Business explained how.
Retirement Option Analysis: How to Bridge the Gap
No matter how long you work, SSNIT has the payment to retirees capped at 60% of the average of your gross income for your best three years. However, this may not be adequate for you. Based on the varied retirement planning options available, adequacy can be achieved through the following means;
Diversification: expand your retirement options by making use of available options such as pension schemes, business, financial investment and family
Timeliness: You will need to set aside 10% of your income if you are in your 20’s and 30’s but 30% – 40% if you are in the ’40s or older. This should form part of your regular contributions to a pension pot.
Consolidation: Yaw Korankye recommends you bring together your investments especially when you hit your 50’s. You have to critically assess the viability of existing avenues and reduce your risks. So, if you are into a high-risk investment, you will need to sell, liquidate or transfer them to low-risk investment.
Lifestyle Adjustment: Yaw Korankye recommends that lifestyle must be adjusted especially if you are 5 years to retirement and have not been able to accumulate your expected resources. Cut down on certain frivolous expenditure and rather contribute a portion of your income to a pension pot.
Knowledge: It is said that “knowledge is power.” “Having adequate knowledge of the dynamics of retirement and opportunities available to plan your investment can assure adequacy,” he said. One way of gaining such knowledge is by seeking professional advice.
Avoid Common Calculation Errors
People either overestimate their incomes or calculate their retirement packages wrongly. These are errors that must be avoided in order not to go into shock when actual retirement earnings are discovered.
To adequately bridge the gap between your working and retirement income, do the following;
- Ensure your pension is adequate
- Diversify your retirement options
- Start your retirement contributions early
- Have adequate knowledge of retirement planning
- Adjust your lifestyle where necessary