FINANCIAL INDEPENDENCE IN RETIREMENT

FINANCIAL INDEPENDENCE IN RETIREMENT.

To be financially independent in retirement is the goal of most people. To start this desirable goal one must start generating savings towards retirement as soon as one starts working or producing income by entrepreneurship. One must also work out a savings strategy to cover unforeseen circumstances during your productive years.

Unforeseen events can disrupt your well laid plans. One must take steps to adequately provide for any unforeseen eventualities. Such negative events include the following: ill health,, death, loss of your job, failure of your business et cetera. Then there are the catastrophic occurrences due to the erratic actions of nature such as:

Floods, Hurricanes, Typhoons, Cyclones, Tornadoes,Volcanic Eruptions, Earthquakes, losses due to Criminal Activity, Vagaries of Nature such as Droughts, Floods and weather patterns due to Global Warming, et cetera. To make provision for recovery from these potentially negative occurrences one must take out sufficient relative insurance.

Join a suitable MEDICAL SCHEME to cover all medically related eventualities for yourself and your family.

However I am aware that a large percentage of the world's population cannot provide for these insurance and medical schemes because of poverty.

To provide for the unfortunate among us, governments must provide for it's poor citizens from taxes derived from those fortunate enough to have good incomes. This is easier said than done because reports in various news media indicate that government officials in some countries use a proportion of the people's taxes and or financial assistance from donor countries to fund their own lifestyles. The means used is usually THEFT OR FRAUD. This is an abhorrent form of criminal activity.

Buying a house and furniture are essential purchases.

When using loans to finance these items ensure that you have the means to pay the lender and make provision for increases in interest rates to avoid foreclosure. Ensure that your final payment is made before you go on pension because pensioners receive substantially less than working people.

Eliminate the cost of buying a vehicle and the subsequent cost of fuel, garaging and maintenance by walking instead of commuting by using a motor vehicle. Walking is an excellent exercise too. It will benefit your health, eliminate overweight and obesity and lessen your carbon footprint.

JOINING A SUITABLE RETIREMENT SCHEME IS ESSENTIAL. If your do not have an adequate pension scheme, you may become dependent on an inadequate old age pension. Inflation becomes a serious matter when you do not have a pension that provides for increases equal to the inflation increase. Some schemes may not provide for inflationary increases. This scenario can lead to dire poverty in a short period of time.

To put this in perspective, I give you my personal experience with inflation.

During 1946 I joined the SOUTH AFRICAN POLICE.

My gross monthly pay was 20 pound or 40 rand. Incidentially one South African Rand was worth One Dollar Thirty Five Cents then. However 20 pound (40 RAND) bought the following in 1946:

One bicycle for 6 pound.

One Rex Truform Top Class Suit for 6 pound.

The balance went for food, clothing and board.

Today a young South African Police Constable gets about 4000 Rand per month, but he or she has to pay approximately 1000 Thousand Rand for a good suit or bicycle.

Inflation over the last 60 years is responsible for this state of affairs. However the money paid in 1946 bought the same goods that the money paid in 2007 will buy. OTHER COMMODITIES REFLECT A SIMILAR INFLATIONARY RELATIONSHIP.

In days of old before banks were established, people used to keep their money in their homes. This was acceptable because they did not have the inflationary pressures we now experience.

If you have money to invest consult a competent financial advisor to help you attain an optimal return on your investments.

Alternatively shop around the banks to obtain the best return with due regard to the safety of your funds.

Banks and other financial institutions can go bankrupt too.

Ideally an investment must cover or exceed the following criteria:

1. It must cover all costs.

2.It must cover the tax due to the government.

3.It must cover inflation.

4.IT MUST PROVIDE A REAL INCREASE IN VALUE.

EXAMPLE:

INVESTMENT AT A BANK - FIXED DEPOSIT.

Investment Capital ................ Rand 1,000,000.

Interest on Rand 1,000,000 at 10% = Rand 100,000.

Less tax say at 40 % .......................... Rand 40,000.

After tax return .......................... Rand 60,000.

NOW COMES THE CRUNCH. IF INFLATION YEAR ON YEAR EQUALS THE INCREASE IN THE INTEREST RATE INCREASE THEN OUR INVESTMENT WILL RETAIN ITS VALUE BUT WILL NOT SHOW AN INCREASE.

EXAMPLE:

Interest at 10% on Rand 1,000,000 = Rand 100,000.

Inflation at 10% on Rand 1,000,000 = Rand 100,000.

Net result the buying power is in equilibrium because the interest is offset by the inflation rate.

TAKE CARE MY BROTHERS AND SISTERS,

SIDNEY WILLIAMS