Gone are the days when you could rely entirely on your employer's pension scheme, or on that of your partner.
You have to make provision for your retirement and the sooner you do so, the cheaper it will be - if you want to maintain your present standard of living the day your retire.
So says Ian Boyd-Gray of Johannesburg-based MIB Insurance Brokers.
All too often people tend to put their retirement planning on the back burner. If you have been relying on the financial provision made on your behalf by your partner or your employer you could be let down badly.
For example, if you are a married woman remember your husband, as a breadwinner, could die or become disabled.
Or, you could decide to get divorced. Where does that leave you?
Let's say you're a 45-year-old woman, divorced, with 15 years to go until you retire. You earn R8 000 a month and you do not want your standard of living to drop when you retire.
You might have a company pension. Assuming that you have worked for the company for 15 years you will be able to draw 27 percent of your pre-retirement pre-tax salary, or R2 160 based on the R8 000 before retirement.
This Boyd-Gray calculates leaves you with a shortfall of R5 180.
He says that the best way to make up the deficit is to build up a retirement annuity (RA) and a unit trust portfolio.
You should invest, under these circumstances, R1 750 a year or R145 a month into the retirement annuity which will give you a monthly income one day of R2 000, assuming you use the entire RA to buy yourself an annuity.
Remember you are obliged to put two thirds of the matured RA into an annuity, the remaining third you can take as cash.
Also remember you are not obliged to buy an annuity from the same insurance company with which you had the RA.
Your employer is allowed to deduct your RA contributions from your gross salary for tax calculation purposes, meaning that at a 45-percent marginal rate, the monthly contribution of R145 costs you R80.
Your pension fund contribution is also made before tax and is calculated on your gross salary.
Assuming your contribution is 7,5 percent, this would be R600 or R330 a month in real terms.
Therefore your total real contribution to your retirement fund is R410 a month.
All this still leaves you with a shortfall of R4 000 a month when you retire and therefore you should have a unit trust portfolio of R350 000 in today's money, assuming that you receive 14 percent interest a year.
Creating a fund of this size is of course a daunting task, but Boyd- Gray says that by making regular contributions to a portfolio of unit trusts, thus spreading your risk and benefiting from what is called rand cost averaging, it is quite possible to arrive at this size portfolio.
He estimates that you would have to contribute about R630 a month for 15 years, increasing the contributions in line with inflation.
Based on a growth of 15 percent, those funds will blossom into the required R350 000 and then you will have sufficient income to live comfortably, proving the point that it's never too late to start your own investment plan as long as you are willing to save about 12,5 percent of your monthly after-tax earnings.
The sooner you start, he says, the less would be the amount you need to save each month.