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Resolutions 2011

Including retirement & financial lifestyle planning in your resolutions list for 2011.

Everyone makes personal resolutions daily and to others such as family and friends, employer and the community in which we live.  Without resolutions, it is easy to wonder along in life and do absolutely nothing.  As 2010 comes to a close, it is time for many of us to look forward with our lives and make those resolutions for 2011.  One such resolution that you should be focused on is your retirement financial and lifestyle planning goals and objectives.  Let’s consider some resolutions that can be included in your retirement plan and some tips will also be included to help you along the way.  These tips should in no way weaken your creativity but empower you to visualize the results of your resolved goals.


Resolution 1: Prepare a plan for your retirement: financial and lifestyle

Creating a plan is always easy.  However to create a comprehensive plan it requires more than just thoughts of one’s preference.  The final plan that is ultimately decided upon is based on the resources, human and financial, that are available to execute the plan design elements.  


Your plan should be designed with the following three areas in mind: (i) Your current financial and lifestyle status; (ii) Your current sources of income to meet the expenses for your financial and lifestyle status; (iii) How you will transition into retirement if it occurs as a result of disability, old age and death.


Your current financial and lifestyle status: this requires a review of your income, savings and expenses.  Are you spending more than your savings in order to meet your current lifestyle expenses?  Are you being tax-efficient in your savings by allocating the maximum tax-deductible amount to an Approved Retirement Savings© plan such as a Superannuation Fund or Retirement Scheme?  Remember, savings first and then it is from your surplus savings that you can use to make investments.  The current Income Tax Act 1955 provides for a maximum of 10% of your emoluments as a contribution to a Superannuation Fund.  For a Retirement Scheme the maximum is 20% and reduced by the amount paid by your Employer, which cannot exceed 10% of emoluments.  As the Nike advertisement states – Just do it.  Make the habit of doing it and you will see the benefits as your contributions grow. 


While it is great to talk about how much financial wealth one has created there is also the need to balance your financial wealth with physical and emotional health.  When was the last time you created a lifestyle plan that includes water?  Not ice cold water, not a bottle of water in hand when attending a function or church!  But room temperature water which is taken each and every day and first thing in the morning.  I can tell you it works. 

Next, your lifestyle needs some exercise and slowing down off the fast lane at least once per week to refresh and renew.  Do take some time weekly for yourself.  As you will note the word stress is not mentioned as it is well known that it is the #1 killer.   When was the last time you had a meeting to discuss how your body works, what you need to do to keep it in tip top shape and how to avoid stress?  Or are you taking it for granted that it (body) must conform to all your needs, wants, abuses and that it will never crack under the weight of stress, abuse and worry?  Think again and take good care of #1.  What I have learned recently is that it is the simple things in life that contribute tremendously to your good health.  Accumulated financial wealth is useless in an unhealthy body: all your wealth will be used to pay for health expenses!  Not advised at all.  


Your current sources of income to meet your financial and lifestyle status: for many individuals, one source of income is debt that comes from credit cards or loans.  These could well be reducing your source of income because the repayments and your income to repay the debts are lower than what you can afford.  If you haven’t heard, the new buzzwords in the financial sector are live within your means.  Financial experts agree that your biggest debt should be your mortgage and not credit cards and loans.  So you need to think carefully before you go into debt and focus on how you can increase your savings.  As you reduce debt, save more until you can invest.  With team effort from your family this is highly achievable.


During one’s working years the main sources of income are usually from employment and investments.  There are very few persons whose ancestors have left for them a guaranteed lifetime income from either an annuity or a family trust.  Therefore, if all your sources of income are from employment you will need to ensure that you have included a savings strategy for an emergency fund that will cover your lifestyle expenses for at least 2 years.  Remember, that in today’s world no one is immune from a redundancy or loss of employment due to closure of your employer’s business, so an emergency fund is crucial. 


How you will transition into retirement if it occurs as a result of disability, old age and death:  This is a tricky area since we have been conditioned to think of retirement as a result of old age and not disability or death.  Let’s look at the risks associated with disability and death for which you will need to include in your plan:  Disability – this can occur in the home or as a result of illness or accident on the road, sea or air travel.  When an individual is disabled it is sometimes difficult to determine what they can actively do.  But their needs are the same as those who are able bodied.  This risk is best protected through disability insurance.  However, here’s a tip about buying disability insurance: you should ask the question whether the insurance benefits are payable as a result of your own occupation or any occupation.  The premiums for ‘own occupation’ is more expensive than ‘any occupation’ and the benefits are payable if you are unable to continue to be gainfully employed in your own occupation and not any other occupation.  Sometimes, a disability will mean that you will need to renovate your home: where there are stairs you may need to replace with a ramp for easy access to, from and within the home.  Disability requires a focus on guaranteed income.  Death: no one likes to think of death but it is inevitable.  However, when death occurs your plan should be to have enough assets which will eliminate debts, especially your home where your family lives, last expenses and most importantly provide a lifetime income for your heirs: spouse and children.  Hence, you and your spouse should become familiar with annuities and the establishment of family trusts.  Where there is clarity in your objective it is more likely to have your financial or insurance professional match a financial product with your goals.  Tip: don’t let the professional tell you what you need; ask for a goal setting worksheet, complete it and then use the information as the basis for all your future discussions.


Resolution 2: Create a list of resource persons who can help you to achieve your plan along the way

In a world that is focused on the I-factor of life and not the We-factor it has become quite easy to believe that you can go it alone.  The truth is that you cannot achieve anything on your own.  Someone would have helped you along the way.  Some resource persons you should have on your team could be selected from the following groups: Group 1 – family and friends and Group 2 – this includes professionals from the legal, financial, insurance and annuities. 


With regards to family members as part of your team, it is amazing how few family members will convene a properly constituted family business meeting!  But many will attend business meetings at work and as members of various clubs and churches but will never convene it in their homes.  If the plan is shared in the family it is amazing how it ignites commitment and shared responsibilities among family members.  This results in a shared vision and ultimate achievement that usually surpasses all expectations. 


It is best to convene your meeting with professionals after you have a family commitment to the goal.  This provides the basis for discussion between you and the professional or with another family member and to determine if the professional is a right fit for you and your goals.  Professionals tend to use lots of jargon.  Therefore, it may be best to lay the ground rules prior to the start of the meeting that a limited amount of jargon should be used and that plain straight English language is expected. 


The focus of your meeting with financial and insurance professionals is to determine which of their products and services will best meet your own needs.  The meeting provides you with the opportunity to make your selection of products and services that best meets your needs.  Remember, retirement financial planning is about putting in place products and services which can meet your guaranteed lifetime income needs as a result of disability, old age and upon death a benefit to your heirs.  Therefore, each financial product should address one or more of these risks.  You may find that no one financial product may meet all three needs due to your affordability.  Therefore, be clear on what is of greatest current need when you meet with your financial or life insurance professional.


The legal professional you may need to consult is one who specialises in establishing a trust, writing a will or estate planning.  You should know the difference between a will and a trust: a will takes effect upon death while a trust can be effective during your lifetime and continue after your death.  A trust is an excellent method for creating intergenerational wealth.


Resolution 3: What responsibility will you take to achieve your goal during 2011?

The success of any plan is based on completing the tasks required.  However, as stated previously you cannot create and execute a plan alone.  Therefore, while it is important to establish the areas for which you will take full responsibility there will be other areas that should be delegated to other individuals. 


The main responsibilities that you should take are that of compiling the details of your plan design, monitoring and reviewing your goal.  This exercise can be done quarterly, half yearly or annually.  Keep in mind though that the longer you take to monitor and review the less likely you will be aware of your progress in a timely manner and make necessary revisions to the plan.  Additionally, you will need to communicate your progress via team meetings: first with your spouse and other family members and then with your professionals.  Since your goals can be continued by successive generations a communication strategy is really important.  Can you imagine what your life would be without today’s technology tools: cell, blackberry, email, Internet, Facebook, etc?  All of these items are a success with the aid of communication strategies.  So design your communication strategy and enjoy your success with your family.


In conclusion, planning is the easy part of achieving your desired retirement financial and lifestyle goal.  So do the plan.  It is the team effort, monitoring and reviewing of the plan that can be time consuming and requires the most effort.  However, the payoff is great: a retirement that is financially secure to meet your lifestyle goals.

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