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RETIREMENT FUND MEMBERSSTAYING ON TRACK FOR RETIREMENT … EVEN IN TOUGH TIMES

Tough times

These are times we’d rather avoid. This one affects our health, our relationships, our well-being, our communities, our way of living, our finances and our futures.

How retiring has been until now

Even before the crisis, employed South Africans were retiring on much less than they were earning just before they retired. The biggest reason for this is that only about one out of ten of us keep our retirement savings invested when we change jobs. The other nine out of ten of us cash in our savings and start saving from scratch at our next job. We also don’t contribute enough to our retirement savings each month. When we get closer to retirement it’s often too late to make up the shortfall.

Things to think about

When times are tough, we tend to question our beliefs and ways of doing things. Right now we’re questioning what the future will

be like and we’re being forced to do things differently as we keep physical distance from each other and our usual activities.

Question old habits

Many of our habits are good – they keep us going from day to day – doing things we enjoy with people we care about. Some of our habits aren’t as good. Most of us don’t budget, keep a record of our expenses or have a financial plan, for example.

Build new habits

There are many things about these tough times that we can’t control: who will get sick, how sick they will be, if the companies we work for will be okay, how the economy will be affected and when financial markets will recover. When it comes to our finances, there are still things we can control. Perhaps we can use this opportunity to do better than before and give ourselves more chance of reaching our goals.

Think (or get advice) before you act

Before you make any changes to your retirement savings make sure you've got good information, understand your options and have asked for help from an adviser if you need it. Reactions to daily news during a financial market crisis can be costly and could stop you from reaching your goals. Take the time to understand and assess your options before acting.

Find out more about the financial market crisis and its impact on your retirement savings

Don’t try to switch your investments based on guessing what the market will do.

Find out if you’ve been saving enoughHow much are you saving towards retirement each month? How much have you been setting aside for emergencies? Are you saving enough? Are you on track?

If you don’t know the answers to these questions or want to know why the answers are important:■ find out more about why emergency savings are important■ register for AF Online (or download the AF Mobile App from the Apple App Store and Google Play Store by

simply searching for Alexander Forbes)■ find out if you’re contributing enough to retirement■ find out more about your retirement savings options if you are leaving your employer■ speak to someone from our call centre number, and if you want advice, our call centre agents can refer you

What to do about your retirement savings during tough times

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Things for everyone to keep in mindFinancial markets go through cycles – they rise and fall. When one market cycle is finished, the next one begins. During your working years while you are saving your hard-earned money, you will experience a few market cycles.

Although financial markets have recently decreased in value along with your savings, as you continue saving for retirement you’ll be buying investments at cheaper prices. In the case of shares, for example, portfolio managers can get more shares than they could before the crisis for the same amount of money. Because financial markets tend to recover, this can benefit you over time.

Retirement fund regulations require your savings to be diversified. This means your savings are invested in different types of investments and the amount in each investment is limited to protect your savings.

Silver linings

Being diversified

Reflect on how you spend your money

Being at home may mean you have some extra time. If so, use some of it to reflect on how you spend your money each month. Are there things you could do differently that may give you a better chance of reaching your goals?

Keep track of your budget and plan for the months ahead. Register on AF Online at www.afonline.co.zato use the budgeting tool and view your balances.

Consider your debt

Do you worry about how to pay off your debt? Would you like to manage your debt better?

Find out more about managing debt.

Devise a plan

Think about your goals and how you might achieve them. Decide if one of the following new habits, or a different habit, would be good for you and plan to start them: ■ Monitor your expenses every month.■ Draw up a budget and stick to it.■ Start saving for emergencies.

By starting a new good habit, you’ll be using this opportunity to put yourself in a better position to achieve what matters most to you. A financial adviser can help you with your financial plan.

Planning for your retirement is the most important financial decision of your life. Ensuring you will have the financial freedom to enjoy your retirement should be top of mind, even in your 20s. This sounds like a lot to ask considering how much we have to think about during these tough times. On the next two pages, we share practical tips relevant for each age group, to help you manage your savings in these uncertain times.

Trust your investment strategySwitching investment strategies when the market falls means you lock in your losses and won’t gain from any financial market recovery. If you have followed a lifestage investment approach, you have been invested in more conservative portfolios depending on how close to retirement you are. Savings in these portfolios have decreased by a smaller extent than other lifestage portfolios. More importantly, there has not been a significant impact on people’s ability to buy a retirement income* when they retire.

*We have estimated the effect using the AF Protector portfolio which aims to protect your ability to buy a retirement income while protecting and growing your savings.

Explore your optionsSet up time with your financial adviser or consultant and revisit your plans to check if you need to make adjustments. It is especially important to discuss what options you have in retirement and how to invest now, so that you are suitably aligned with the option you are most likely to select in retirement. Explore the options you have in retirement.

If you feel less financially prepared for retirement, you could:■ consider working a few more years■ explore options to earn other income■ find ways to reduce your expenses

SOON TO RETIRE (60s AND OVER)

MID-CAREER(40s AND 50s)Consider increasing your contribution rate

Since you don’t have many years left to build up your savings before retirement, you may want to consider saving even more so that you are on track to meet your retirement goals. Use the online retirement savings calculator to estimate how much you will need or to explore what other options can help you catch up if you find you’re not on track.

Review your plansSet up time with your financial adviser or consultant and revisit your plans to check if you are still on track to meet your goals or if you need to make adjustments. Keeping your savings invested (called ‘preserving’) if you change jobs now is a vital step to achieve your longer-term objectives.

Stay committedDon’t abandon investment strategies designed with long-term goals in mind during tough times. Now is a good time to assess if you’re on track, check your plans are still good in light of new information and make carefully considered adjustments where needed.

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You can help yourself get better outcomes during tough times, no matter what age.

Time is on your side It is useful to have plenty of time to see the results of your good decisions. Saving from an early age means that your money has more time to work for you. Savings can help you out in tough times and help you achieve the things that matter to you. When you move from one job to the next, make sure you keep your savings invested, whenever possible, so that they can continue to grow.

Keep at itThere are still plenty of years for you to build up and grow your wealth. Continuing to invest when markets have lost value means buying more for the same rand amount. This can benefit you as markets recover.

Cash is not necessarily saferAlthough switching into cash or other conservative investments may seem like a good idea right now, these investment types are less likely to grow your money over time.

YOUNG ADULTS(20s AND 30s)

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The following businesses are licensed financial services providers:

▪ Alexander Forbes Financial Services (Pty) Ltd (FSP 1177 and registration number 1969/018487/07) ▪ Alexander Forbes Investments (FSP 711 and registration number 1997/000595/06)

While care has been taken to present correct information, Alexander Forbes and its directors, officers and employees take no responsibility for any actions taken based on this information, all of which require financial advice.

The information in this document belongs to Alexander Forbes. You may not copy, distribute or modify any part of this document without the express written permission of Alexander Forbes.

Credits: Alexander Forbes Communications (production) | Getty Images (imagery)19609-2020-04

Don’t let fear and the other negative emotions we experience in tough times stop you from achieving your goals. Use the opportunity these tough times present to asssess how you’ve been doing financially. Revisit your plans and goals, and establish good financial

habits that will help you achieve what matters most to you.

Advice matters

Getting professional personalised advice, at the right time, can:■ help you decide which of your goals to prioritise■ identify the solutions or services that can help you achieve them■ improve your chances of financial success throughout your life and in retirement.