Every worker, one way or the other, will have to retire one day. Retirement is supposed to be a period of relaxation and sober reflection. It is a time we can pursue our unfinished lifetime goals. Sadly, a lot of people do not realize the financial implication of retirement until their retirement is near.
One needs to plan carefully to ensure financial survival after retiring. Ghanaians have a poor savings culture and hardly prepare for retirement. Many people assume that Social Security is enough to maintain their lifestyle for the rest of their lives. It is a well known fact Social Security in Ghana has failed to provide sufficient income for retirees. It is to address this gap that the 3-Tier Pension reform has been implemented. The tax reliefs granted under the voluntary (Tier 3) scheme is intended to help workers make supplementary savings towards their retirements.
A comfortable retirement is the result of all choices made during one’s active working life. If you can cultivate the habits of saving and investing, then you can take control of all aspects of your retirement life. Controlling your choices and making simple planning now, will enable you reach your goal of a comfortable retirement.
Retirement planning is in many ways an inventory-taking process in which you must examine your current status and project your future needs. Following the simple steps below can help you in the planning process:
1. Identify Your Goals
When establishing your goals, it is important to be realistic and optimistic. Certainly you have basic needs for which to plan i.e. food, shelter, clothing and medicine. But beyond the basic needs are ones’ wants. Identify your basic needs and the wants you desire during retirement.
2. Take Inventory
Planning for retirement is like planning for a trip – you must know where you are now before you can determine the best route to reach your destination. The process of gathering information regarding your current financial situation is one of the most important steps in planning for your retirement. Identify all current assets, liquid and non-liquid, as well as all current and future, real and contingent, liabilities. The result of this exercise should be a realistic net-worth statement that will give you a foundation for future financial success.
3. Review Your Financial Situation
Now that you have established your goals and gathered information on your net-worth, you must analyze whether your goals are attainable. This may also be an opportune time to establish a budget to identify any extraordinary or excessive spending. Once you have thoroughly analyzed your financial position, you are ready to move on to the next step of selecting a strategy to attain your goals.
4. Select a Strategy
This step identifies the mechanisms available to help ensure that your savings are most efficiently used to meet your financial goals. There are several ways to save for retirement. You can setup a voluntary pension account with your company or register with any independent provider if your employer does not have any pension arrangement. You can also invest in mutual funds or any financial instrument on expert recommendation.
5. Action Point – Implement Your Plan
In order to be successful, your plan must be implemented. All too often people fail in planning for retirement because of a lack of resolve to implement their plans. After carefully selecting a strategy, write out your action plan as to how it will be implemented. Your action plan should identify some specific goals and key milestones to your success.
6. Monitor Your Progress
To ensure that your action plan is actually going to enable you meet your stated goals, it is essential to monitor your progress. Documentation of this regular review session will serve as a reminder of past progress.
Pension Advisors from Axis can help you identify realistic goals, review investment strategy, and make inputs in your projections. If your company needs any assistance with retirement planning for employees or in setting up a pension plan, talk to your employer about contacting us.