Your child’s education could cost you your retirement!

School Teacher at Work

By Warren Jeffery

Putting two children through school will knock your retirement savings by about 7.6 million rand! And that’s if they go to a government school. Private schooling will knock off a massive R27 million from your retirement nest. Add to this university fees, and you can bump that figure up to over R10 million.

Cash-strapped parents are forced to choose between saving for a secure retirement and paying for a quality education for their kids. And most parents chose to put their children’s future prosperity ahead of their own. In fact almost one out of every two South Africans, with less than ten years until retirement, hasn’t even started saving for it. And not having adequate retirement savings could mean your loss of independence and continual financial stress through your ‘golden years’.

Half price property – how this simple trick can get you a new home for a 70% discount! You need to face the facts…You will need at least 14 times your final work year’s annual income to be able to withdraw enough money each month to maintain your lifestyle throughout your retirement and keep up with inflation!

With a 5% annual increase on a R300, 000 per year salary at the age of 50, you’ll be earning R623, 000 by the time you retire at 65.  This means you’ll need around R8.7 million put away to retire happily. If you only start to put away the standard 10% – 15% of your income when you’re 50, you’ll fall far short of your retirement needs.

Even with a market beating return of 15% per annum, you’ll only manage to build up R3.2 million by the time you reach 65. Way short of the R8.7 million you need.

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So how can you fast track your retirement savings?

To save up 14 times your final annual salary is a tough ask…But it is achievable! The first step is to be disciplined and start putting money away towards your retirement every month. I know this is clichéd but the truth is it’s just something you have to do.

Your target should be to put away at least 15% of your gross salary from as early on as possible. The longer you do this and the earlier you start, the easier it is to reach your retirement goal. Now if this isn’t possible while you are trying to support your kids, then you are going to have to have a strategy to ramp up your savings as your children leave the nest.

So, where do you start? The key is to develop a savings mind-set. When you get an increase or find a way to save money, try to carry on living as if you never received the extra money. Instead, push this extra money towards your retirement savings.

When you no longer have to support your children, work out how much you were spending on them each month. This can add up surprisingly quickly. By just considering education fees, clothing, food and groceries, healthcare, transport and entertainment you’ve likely been spending in excess of R6, 000 per month on each child.

Now, instead of splurging this extra cash, you can choose to plough this ‘free’ money into your retirement. This will give you the cash injection you need to fast track your retirement plans, especially if you’ve left your savings a little late.

Assuming your kids leave the nest when you turned 50, you have 15 years to boost your savings and get ready for retirement. Now let’s say, conservatively, two kids cost you R12, 000 a month. When they leave the nest, you’ll have R144, 000 extra disposable income per year to add to your savings.

By simply increasing this savings amount by 5% per year and targeting a very achievable 15% per annum return on your money per annum for the next 15 years, your savings would reach a very reasonable R10,032,269 by the time you’re ready to retire. This works out to 16 times the final annual salary, should you be earning R500, 000 rand per annum when you retire.

This gives you plenty of margin for safety to weather rough markets and lower than anticipated returns. Claim your ticket to a millionaire lifestyle on a poor man’s budget.

Here’s how you can: Double Your Wealth every Three Years…Turn Cents a Day into a Sizable Fortune…And live a Millionaire Lifestyle on less than you ever imagined possible! Maximise your returns for a happier retirement! To get the most out of your retirement you need to maximise the returns on your investments.

A great way to do this would be to use a system like that used in our Unconventional Millionaire Portfolio. By tapping into some of the best investment strategies of all time The Unconventional Millionaire system is able to sift out the true market winners. In fact, between 2010 and 2012 this remarkable portfolio returned an amazing 73.4% while the JSE All Share Index only managed to muster 26%.

Its market-beating returns like these that’ll fast track your retirement portfolio! Here’s to staying ahead of the game.

Warren Jeffery, Head of Research and Trading, FSP Invest.

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