Neil Pienaar | Regional Manager | Financial Advisory Service & Enablement | PPS | mail me |
New year, new dreams, new aspirations, new diets, new action plans, new holiday ideas, new jobs, and typically, also a “new you.” We can all relate to the “new year, new you” tagline.
A fresh start to get our lives back on track and to live the lives we want to live. The question is, how many “financial” goals exist in your resolution list?
Some people set financial goals to help them achieve financial wellness both now and in the future. At the same time, others are more focused on the now because financial constraints limit their ability to focus on tomorrow.
SMART financial goals
With a new year, we encourage you to usher in a new way of setting financial goals. You can achieve your goals and realise financial security by applying the SMART formula. The SMART formula is Specific, Measurable, Achievable, Realistic, and Time-based for those unfamiliar with it.
Some of you may have seen the video of US Navy Admiral, William McRaven, titled the Power of Hope, given at the University of Texas Commencement Address. If you have not, I highly recommend that you do. The video details ten tasks to change the world but begins quite simply. The first task is… to make your bed. By making your bed, you accomplish something that subconsciously ignites your brain to want to achieve something else and another task.
The same can be said about savings and investments. We all see this mountain to climb, “the Everest,” called retirement. How am I going to do this? I cannot afford it! A Sisyphean task or in other words a task that is futile or can never be completed. However, drawing inspiration from Admiral McRaven, all one needs to do is start. That is the first step towards financial freedom.
When you set your SMART financial goals, they should be personal to you. Your goals can be challenging, but they shouldn’t be impossible. February is the end of the tax year, with a significant focus on retirement annuities and investments. However, it can also be a springboard to your “new you” philosophy.
Retirement annuity
Starting your retirement annuity or adding more funds to your existing investment is an excellent tool for building wealth for retirement. Retirement annuities are often the first point of departure when structuring your retirement savings goals, as the benefits of a retirement annuity are significant.
Retirement annuity benefits
- Contributions up to 27.5% of taxable income/remuneration or R350 000, whichever is less, are tax deductible.
- Retirement annuities do not form part of your estate and are great for building wealth outside the estate.
- Beneficiaries can be nominated and can therefore be used in succession planning.
- Disallowed contributions over and above the prescribed tax benefit limit are rolled over to the following tax year. Alternatively, any disallowed contributions can be taken at retirement tax-free or offset against the income drawn from your living annuity to reduce your tax liability.
- Accessibility is restricted to the age of 55, forcing individuals to preserve capital for retirement.
In conclusion
He who hesitates is lost. No idiom is more valid when applying it to saving for retirement. It’s a new year, so make SMART financial choices. Kickstart your 2023 by setting achievable financial goals, and start investing in your future. Every salary is an opportunity gained.
