A number of workers struggle during the working years, only to find in retirement that the struggles have gotten worse as their pension income is far less than their pre-retirement income.

An alarming number of these retirees had worked 40 hours per week for 40 years and retire at 40 per cent of their income, only to realise that their pension is not enough. With increasing inflation some retirees are finding it difficult to cope.

The key, however, for adult employees is to contribute a maximum of 20 per cent of their income to their pension fund, and to start early. In addition, working adults should invest to supplement their pension income in order to beat inflation and provide financial freedom. For employees who are not in a position to make maximum contributions to a pension plan, be encouraged; continue to make pension contributions but supplement your contributions by investing. Having a diversified investment fund of stocks and bonds minimises risks and provides above-average returns. The longer funds stay invested, the greater the returns on your investment. Invest in assets that increase in value, such as stocks, bonds, and real estate.

Recently, a teacher visited me to discuss her plans for retirement. She lamented instances of teachers retiring without adequate retirement income and struggling financially after working for many years in the public sector. Her resolve is to not suffer the same fate, therefore a plan of action was designed for her, incorporating a diversification strategy. Funds are earmarked for short-term goals and emergencies, while investing in a diversified stock portfolio for the long term. Having a salary deduction system in place ensures that regular monthly payments are made to her investments for greater growth of her assets.

The importance of time

Understand that it is not the amount you earn, but how much you save, how often you save, and for how long. Too often people put off saving for retirement because they believe they have a lot of time or that they can make up for the time lost. But there is no magic wand that will give instant and sustained wealth. You can’t make up for the time lost. Time lost cannot be regained. It’s what you do with the time you now have that counts. Time is an asset; it is needed to grow your money. Compound interest needs time to create sustained growth in your investments. Also important is the investment vehicle that will take you to your destination. It was motivational speaker Les Brown who said: “There is no secret to success; there is only a system to success.” The question is, are you saving or investing in the right system?

Investing after retirement

Saving and investing shouldn’t end when you retire as your bills never retire. Medical bills, home improvement, and maintenance costs are likely to increase in retirement. Inflation is an ever-present threat to your money. It never goes away, and it robs your pension income of its purchasing power. Continuous investments after retirement are necessary to counter the effects of inflation. Some retirees regularly save portions of their pension in an investment instrument to ensure that they do not outlive their money in retirement. Having a good saving habit prior to retirement makes it easier to remain prudent during the retirement years. A retiree aged 65 and in good health is likely to spend another 25 to 30 years in retirement. Your money should outlive you.

Streams of income

Working adults should consider creating streams of income prior to retirement. Research shows that retirees who have streams of income enjoy financial freedom and create wealth. But how can working adults create streams of income?

Have a part-time job, while working full-time. There are employers who are seeking temporary workers or freelancers. But, why not create your own income? Use your skills to create income. he Internet is a minefield of opportunities. Also, invest in stocks for the long term. The stock market has peaks and valleys but it has proven for centuries to create wealth and financial freedom for many who are patient and persistent. It provides passive income while you sleep. Real estate is another asset that will provide ongoing income in retirement.

Your retirement years can give you peace of mind but it has to be designed — you don’t get there by default. Be intentional about your future. A qualified and competent financial advisor can guide your retirement journey.

Grace G McLean is financial advisor at BPM Financial Limited. Contact her at gmclean@bpmfinancial. and visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com