8 smart ways to start planning for your retirement

As the saying goes, how you finish a task all depends on how you start it - and reaching your retirement goal is no exception. If you start strong, with a good plan suited to your needs, retiring in comfort need not be a pipe dream. But where should that planning start? We believe it’s with the following 8 principles.

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1. Have a goal

It might seem like an obvious place to start, but having a retirement goal is the first step in being able to reach it. The trouble is, most people either lack one completely, or grossly underestimate how much they will need.

Remember, the whole point of a retirement goal should be to maintain your accustomed standard of living after you stop working. To achieve this, you will need to secure an annual income that replaces at least 60% of your final salary, growing with inflation.

2. Save the right amount

No rocket science here. The number one reason most people miss their retirement goal is because they don’t save enough along the way. But how much is enough? It all depends on how old you are when you start, and when you want to retire. Below are some helpful guidelines:

3. Start early…


With any kind of saving, the earlier you start the better. However, when it comes to your retirement, starting early is even more important, thanks to the power of compounding – in other words, earning a return on your return.

4.…And if you don’t, know how to catch up

If you are only able to start saving for your retirement later in your life, don’t panic. Your retirement goal can still lie within your reach. You’ll just have to save more each month, and maximise your investment at every turn. For more insight into what amount you need to be saving according to where you’re starting, use the 10X retirement calculator here.

5. Choose High Equity

High equity in an investment portfolio is often associated with high risk. But while this may be true over the short term, over a long term investment period, high equity delivers the highest returns with similar or lower risk than Medium or Low Equity portfolios.

So, let your time horizon guide your investment risk. If you are young, you can afford to ride out short-term volatility and invest in a high equity portfolio. But remember: when you approach the end of your investment term, adjust your portfolio and invest in lower return assets such as bonds and cash, to preserve what you have saved.

6. Say no to high fees

Do you know how much you are paying in investment fees every year? And what this means for your investment outcome?

The ugly truth is that paying total annual fees above 1% greatly diminishes the likelihood you will achieve your retirement goal. And paying an annual fee of 3% will almost halve the real value of your pension - and ruin your retirement. So keep your fees low. Shop around for a low cost provider like 10X, and make sure your provider is transparent about what you’re paying. The last thing you want when you retire is a nasty surprise.

7. Choose a diversified portfolio

Remember that old saying not to put your eggs in one basket? It applies to your retirement too. As the textbooks will tell you, a diversified portfolio is likely to deliver a higher return with less risk than a concentrated portfolio. If you are overinvested in one asset class or security, you assume what is known as concentration risk - the risk that one investment will have a disproportionate impact on your savings outcome. This can work for you or against you. Of course, with hindsight, we regret not having put all our money into, say, the Apple basket back in 2000. But by the same token you could also have bought high-flying Dimension Data at R75 in 2000, and watched it nose-dive to R1.80 over the subsequent three years.

As a retirement investor, you cannot afford the downside risk, as it may ruin your pension. Remember, retirement planning is all about reaching your goal with the lowest possible risk; not about gambling your way to a dream existence.

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