RETIREMENT planning can be a long game — doing what is necessary to ensure success. It is the small price you pay or the sacrifice you make today to make life easier in the future.

Losses, failure, and setbacks may happen along the way to finding peace of mind in retirement, but it’s important to keep reminding ourselves that retirement is not a destination but a journey.

Retirement opens another chapter of living and putting your money to work for sustained growth. Learning new skills, social engagement, and leisure make life more meaningful for retirees. But playing the long game requires an early start. Be quick out of the blocks to get a head start. Spend less than you earn and make sure to save and invest. Those who start contributing to a pension plan in their 20s will soon recognise that the retirement journey will become easier and more rewarding if they stay the course. The retirement journey should begin from the first pay cheque.

Since there is a long game, it follows that there is a short game. It is the direct opposite of playing the long game. The short game is about immediate gratification – spending now and tomorrow will take care of itself. Playing the short game is a sure way to spend more than you earn. Spending years playing the short game can deplete financial resources as time gets harder. Initially, the cost of the short game seems small, but as time goes by and the amounts compound, the law of accumulation effectively brings into sharp focus the sizeable cost of the short game. Inflation eats away at the purchasing power of funds earned and sums of money buy less and less. At this point, investors in the short game realise that they have spent years playing the wrong game. Having gotten older, there is little or no contribution to a pension plan and it becomes harder to plan and save for retirement.

To understand the long game, let’s look at an example of a 25-year-old contributing $5,000 per month to a pension plan and a 40-year-old contributing $5,000 per month at the same rate, with an average interest rate of 8 per cent per year. The 25-year-old would accumulate approximately $23.6 million dollars by the normal retirement age of 65 years. However, the 40-year-old would amass approximately only $6 million by age 65. They started their pension contributions 15 years apart. Note the difference that time played in the long game. The longer your money is compounded the greater the returns on the investment.

Playing the long game for retirement will lead to a greater pension payout. Saving and investing for the future doesn’t mean that one should give up the joy and pleasures of life. It requires choosing to be disciplined about saving, investing, and spending. Just as a balanced diet is important for healthy living, a balanced financial plan is also necessary for a successful retirement journey. A good guide for the long game is the 50/30/20 budget formula. Fifty per cent should be allocated for necessities, such as a mortgage, rent, electricity, and food. Thirty per cent of your income should be allotted to travel, shopping, and health care. The remaining 20 percent should be earmarked for saving, pension, and investing. The less debt you have, the more funds are available for investment. Keep debts to a minimum. With regards to travel, leisure, and shopping, review your credit card statements and see what expenses can be reduced or cancelled. Check your pension statements. You may need to increase your pension contribution or increase your long-term investment. Also, have adequate cash for emergencies. Do you know how much funds will be required for your retirement? Since you may spend up to 30 years in retirement, calculate the future value of your current income. Ideally, you should retire at a minimum of 80 per cent of your pre-retirement income. Multiply the result by 30. The result will indicate how much funds should be accumulated to provide adequate income for your retirement years.

For individuals who plan to retire earlier than age 65, an adjustment has to be made to increase contributions to pension and long-term investments as more years will be spent in retirement. Some people may need to make readjustments for mortgage and other debts in retirement and, therefore, long-term investments will be necessary to provide additional income in retirement.

As the cost of living increases in retirement, stocks have proven to be the best weapon against inflation over the long term. House rental, property sales, and investment in real estate investment trusts can also provide extra income in retirement. Invest in stuff that adds value to your life, such as knowledge, finance, and relationships. Play the long game, invest for decades. Live the life of your dreams.

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