Retirement: How to Enjoy your Golden Years Carefree
One of those inevitable phases of life, retirement signals the end of constant hard work and an escape from the rat race, while it marks the beginning of a stress-free life with more time for family and friends, pursuing new hobbies and vacationing. But whereas for some, this is a time to look forward to, for others it is a period of worry due to the loss of a steady source of income. In effect, retirement is when income drops and expenses rise and without the appropriate preparation, it might see you giving up on luxuries you may have been used to like travelling and eating out, while you are left keeping a constant and anxious tap on your decreasing savings.
Amassing enough wealth to see you through your golden years might take decades depending on your income and whereas other financial commitments may become a priority in your 20s and 30s such as starting a family or getting on the property ladder, it is never too early to start getting ready for retirement. A retirement plan can help you harness the power of saving early and will help you build a substantial cushion enabling you to fulfil your retirement dreams.
What is retirement planning and why is it important?
Retirement planning has in recent years evolved as the increasing cost of living is pushing more and more individuals to work harder and for longer in order to qualify for the measly state pension. But whereas retirement and financial independence go hand in hand, achieving both means that you have sufficient savings, investment income or pension income to cover your living expenses so that working becomes optional. This means that enjoying a comfortable retirement largely falls on your shoulders and this should serve as a good incentive for you to become proactive.
A retirement plan delineates your sources of income, estimates your expenses, implements a savings programme and manages your assets and risks, while also taking into consideration your life expectancy. It should be a lifelong process and not something carried out when your retirement date draws nearer.
So why is it crucial?
As the average life expectancy is constantly rising, you will be needing more retirement funds to maintain your standard of living. At the same time, you cannot be expected to work until the day you drop. As you age, you will automatically start slowing down and even if you plan to work occasionally or on a part-time basis during retirement, you still need to work towards a fund. It is also wise to consider the fact that your future may have more financial challenges than your past or your present, so you should be able to weather any issues down the line, whatever these may be.
As the daily stress of work gives way to the subdued period of retirement, for many this is the best time to check off your bucket list and enjoy places and experiences you have been putting off for a while. But unless you have amassed a healthy pool of funds, your dreams cannot turn into reality. More importantly, with a solid plan in place, retirement can be a time for giving back to your family by either chipping away at your funds when the need strikes or leaving a legacy that can be passed on to your loved ones when you pass away.
How to implement a successful retirement plan
Like any other type of plan, your retirement plan should clearly outline important factors that can make or break your retirement like your expected retirement income and budget, as well as your investment options. Whether you are going at it alone or drawing it with an advisor, here are a few rules of thumb you should follow when drafting yours.
It goes without saying that the earlier you start planning and saving for the future, the more comfortable your retirement will be. Delay doing so by a couple of years and you will end up having to save a larger chunk of your salary on an annual basis in order to achieve your retirement goals. But apart from helping you create a cushion of savings for later on in life, there is one more important reason why saving earlier than later is a wise move. The younger you begin, the more calculating risks you can take with financial products.
Know your sources of income
To determine your potential sources of income later on in life you must take into consideration things like whether you are planning to work on a part-time basis or freelance, while you must also be clear about your monthly income and returns should you decide to go for a government or private pension.
Determine your budget in retirement
Linked to the above, you must establish what budget you will possibly be needing during retirement. This will vary from person to person depending on what your goals are and contrary to what you may have thought, the budget you may be needing later on in life may be more than your current one. Determining this now will also push you towards making certain adjustments to your current spending.
Invest in different avenues
Regardless of whether you will be receiving a state or a private pension, you should always consider growing your money. There are several ways you can go about it. For instance, you can invest in a variety of funds that tend to offer high rates of return on investment like the Global Opportunities Fund and the UBS Equity Fund or you can invest in stocks. You may also want to look into real estate which is one more way of obtaining a steady check every month. Run by a dedicated team of investment professionals with an exceptional track record in asset management, Calamatta Cuschieri (CC) can help you make the right investment. Explore our full range of investment solutions.
Consider the possibility of long-term care
As the old adage goes – with old age comes wisdom – but with it may also come a number of age-related diseases, some more serious than others. Should the inevitable happen to you, you should ideally have an amount specifically reserved for this purpose. Locally, healthcare is free of charge, but if you need more individual care, you might need to resort to a private alternative. You may also want to consider protecting yourself and your loved ones with life insurance.
Stay on top of estate planning
Estate planning is not simply about your preferences on how your assets should be distributed after your death. It also involves catering for matters like power of attorney, your will or trusts, as well as appointing the individual who will take decisions on your behalf should something happen to you unexpectedly. Planning about these things ahead of time will reduce any issues escalating between members of your family, while you will hinder your loved ones from having to face financial hardship should you pass away. For this reason, estate planning is regarded as a key step to a well-rounded retirement plan.
Make a difference to your retirement with CC
Creating a sound plan and making complex financial decisions for your retirement that take into consideration all factors is no easy feat. If you get stuck drafting one yourself, consider getting professional one-to-one help and advice. CC’s financial advisors have gained an excellent reputation for consistently offering a bespoke and transparent service to clients at highly competitive prices. Armed with the necessary skill set, they have the knowledge and expertise to help you understand the realities of fluctuating income demands throughout your retirement and how improving financial wellness today will help you reap rewards in retirement.
Offering support to clients throughout the entire retirement journey, our advisors help clients by:
1. Planning for retirement when you are seeking growth
Whether this takes place during your 20s, 30s or even your 40s, our advisors will guide you through asset allocation and will ensure that your portfolio is diversified in order to make the most of compound interest but prevent you from losing all your money if one asset class goes south. Time is still on your side, which means that you can absorb changes in the market, while you can afford to focus on more aggressive growth stocks as opposed to slower-growing assets like bonds. If you are in your 40s and at the midpoint of your career, now is the time to seriously build your portfolio. Our advisors will urge you to stick to investments that have a track record of producing returns but offer the best chance of beating inflation.
2. Delving deeper into the last key 5 years before you transition into retirement
In the years edging closer to your retirement, you should be looking to preserve your capital. To do so, your advisor will monitor your investments closely and help you decide whether you would like to keep most of your funds in safe investments or allocate them in a variety of asset classes. Switching some of your investments to more stable and low-earning funds might be a better-suited option at this point in your life.
3. Offering you support throughout retirement
When you have finally reached retirement, your focus will turn from growth to income and how you can maximise this from your accumulated wealth. Having said that, you may not need to cash out all your stocks. Your investment approach should age with you, so depending on your targets, your advisor may focus on stocks that provide dividend income.
What type of pensions schemes are available in Malta?
Locally pensions are typically paid from one or more of three different sources. These so-called pillars consist of the state pension which provides a basic standard of living financed through your Social Security contributions, personal private pension schemes and occupational private pension schemes. It is a well-known fact that the number of people paying into the social security pot is dwindling compared to those being retired and receiving pensions, which means that in order to keep the current system going, employees will either need to contribute more or retirees will have to receive less of a pension.
If this first pillar is unlikely to stretch far enough for you to achieve your retirement objectives, there is a better way to approach pensions. CC offers the Lifetime Private Pension Scheme and the Lifetime Occupational Pension Scheme to clients. Both enable your pension pot to grow at an unparalleled rate with added security from a diversified nature of investments, offering a steady income at retirement and peace of mind for the future of your finances. In addition, thanks to new legislation which introduced incentives for individuals to save into a personal pension plan, you can withdraw up to 30% of your sum tax-free at retirement, while you can benefit from up to €500 per year in tax credit.
Retirement is an important milestone in life but with it comes the responsibility of having enough funds to finance your lifestyle and those of your loved ones. The key to a successful retirement plan is to evaluate your needs, set your financial goals, draw a retirement plan earlier rather than later and opt for products that will both help you reach your objectives while protect you from market volatilities.
One of Malta’s largest independent financial services group and a founding member of the Malta Stock Exchange, Calamatta Cuschieri pioneered the local financial services industry in 1972. Since then, the Group has constantly pushed forward, moving from strength to strength, gaining an excellent reputation along the way for consistently offering a bespoke and transparent service to clients at highly competitive prices. Today, CC has established itself as a 360-degree financial planner for investments, pensions and life insurance.
Visit one of our local branches situated in Mosta, Fgura, Sliema, Qormi and Birkirkara for a free financial health check and to draw a solid plan that is set to lead you towards a carefree retirement. Get in touch with one of our advisors today.