The importance of reviewing your retirement plan

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A common mistake by consumers is assuming that by making monthly contributions towards their retirement savings will yield positive results. However, what tends to be overlooked is the overall performance of the funds that they invested in and whether or not the contributions are sufficient to fund their ultimate retirement goals. 

Preenay Sathu, Wealth Manager at FNB Wealth and Investments says, “it is important to conduct regular reviews of your retirement plan to ensure that it’s still in line with your long-term goals. This will help ensure that you make the right adjustments should there be areas that are lagging behind.”

Sathu unpacks factors to consider when reviewing your retirement plan:

Fund performance: funds that you are currently invested in might be performing well today, but this might not to be the case in the near future. It is advisable that you regularly assess and review the performance of your funds and rebalance the portfolio when necessary to ensure that you achieve the desired gains.

Asset allocation: apart from fund performance one needs to review the prevailing asset allocation in relation to the overall portfolio and determine if the current asset allocation is still appropriate and aligned to the overall objective of the portfolio considering prevailing macro-economic and political factors.

Fees: this is a critical component of any retirement plan. One needs to ensure that the fees applicable to one’s retirement plan is fair, transparent and does not detract value from the overall performance of the plan. Fees to be cognisant of are advice fees, platform fees, asset management fees including any performance fees.

Change in economic conditions: political instability and inflationary changes are some of the external factors that have a direct impact on your investment. You should consider these factors when reviewing your retirement plan and enlist the services of a certified financial advisor to help you invest on vehicles that will yield positive results.

Standard of living: when you go on retirement, you should be able to maintain the same standard of living you lead during your working life. Proper planning is key in ensuring that you have sufficient income to live a comfortable retirement.

“Conducting regular reviews of your retirement based on your current standard of living and the life you want to lead in retirement will give you a good indication as to whether your current contributions are sufficient to supplement your lifestyle in retirement,” says Sathu.

Dependants: if you have dependants such as children and extended family members that rely on you for financial support, it should be considered on your retirement plan. For example, if you plan to start a family at the age of 35 and have the desire to retire at 55, this means that your children are more likely to be at university when you retire. As a result, you should ensure that you are at a financial position to finance your children’s education.

“it is worth noting that retirement planning is a long term financial commitment. It requires a lifetime discipline that should be practiced in order to have a financially healthy retirement. Moreover, consumers are advised to increase their monthly contributions to accommodate inflationary changes,” concludes Sathu.

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