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When most of us picture our retirement, we’re lounging on a beach or perfecting our tennis serve. But, in order to live that fantastic life of leisure, you’ve got to have ample money in the bank and enough life left in you to enjoy it.

Even those of us who love our jobs may be looking ahead to those golden years and wondering when they might come. A recent Gallup poll finds that the average retirement age non-retirees estimate for themselves is 66, an age that has held steady since 2009. 

But a key factor will be whether you’ve saved enough to comfortably quit working at 66—or whatever age you prefer. Are you on track? Here’s what you need to know about when you can retire.

Where will my income come from in retirement?

The idea of no longer earning an income from a job can be scary, but if you did adequate retirement planning during your career, you should be set. Here are the basic ways that you can get income during retirement.

Your retirement accounts

Even if your potential retirement is still years (or decades) away, the time to start saving is now. 

That’s because you want as much time as possible to take advantage of compound interest. This is where the savings magic happens: What happens is your investments generate interest, which makes your account larger. Then that even bigger sum earns even more interest…over and over. The more you save at the beginning of your career, the longer the time the interest has to build on itself. Your account will grow far larger and you’ll likely have to save less overall the earlier you start. 

As you plan your retirement savings strategy, it might be wise to speak with an investment professional, such as a certified financial planner, to discuss your goals and strategy. Financial planners can help you prioritize a customized saving strategy, but in general the first place to start is typically by taking advantage of tax-advantaged accounts tax free investment account.

Once you have put in the maximum yearly amount for those accounts, you might want to open a brokerage account, so you can continue saving. The best strategy is to create a diversified portfolio of investments with multiple asset classes. Ones to consider include shares, mutual funds, bonds and exchange-traded funds, known as ETFs. Because each type of investment behaves a little definitely as the market goes through its regular cycles, diversification can help protect your savings in all kinds of economic climates. 

Dividends

In addition to receiving funds from the money you’ve saved and its growth, some retirees earn “dividend income,” or a bonus payout from specific shares or funds in their portfolio. 

How much should I save before I retire?

Well that’s the million-dollar question—and R1 million might seem to be a good place to start. If that sounds daunting, remember that you aren’t actually saving every Rand of your future retirement accounts; ideally they will grow as the market grows.

That’s why you want to make sure to account for your time horizon, meaning that investors who are farther away from retirement will likely want to consider more aggressive options that will help their retirement savings potentially grow faster, giving you even more time for compound interest to do its job.

One factor that’s completely out of your control is the market’s performance in the years just before and while you are making your withdrawals. That’s because even though we can feel confident that the market will eventually recover from any downturn, as it always has, no one can predict how long that will take and how that can affect someone close to or in retirement.That’s another reason why it’s important to have a portfolio structured to weather inevitable market ups and downs as much as possible.

It’s hard to estimate exactly how much you will need to retire comfortably, given the many unknowns such as how long you will live, how purchasing power will be affected, what your health care costs might be, what the market will be doing at that point in time, etc. etc. There are a number of retirement calculators online that you can play around with to see what might work for you.

What can I do now to ensure a healthy retirement?

The best advice is just to keep investing. Of course, the current market conditions are putting people’s risk tolerances to the test. After all, it’s painful to continue investing if you’ve experienced a sharp drop in your portfolio’s value. However, take heart that markets have always recovered after a downturn and gone on to hit new record highs, which you don’t want to miss. 

You also can consider the fact that investing during a downturn means that you are essentially buying “on sale,” which means you may be able to scoop up solid gold investments at a fraction of what they were in the past. But, as always, keep your financial goals in mind. Since there’s no sure thing, stay focused on a diversified and disciplined approach.

How will I know when the time is right to retire?

Some people end up retiring before they’d like due to health concerns or family issues, so sometimes it’s not up to you. But ideally you can make that decision when your finances say you’re all set.  

While none of us has the crystal ball that can help us know exactly when we can retire, it’s best to remember that there will never be a one-size-fits-all approach as everyone’s goals and situation are unique. Keep working, keep saving and keep enjoying the life you have now. 

Investing involves risk including loss of principal. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult your tax and/or legal counsel for specific tax or legal questions and concerns.

Retirement

When can I retire?

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