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Safeguarding One’s Financial Future


Safeguarding One’s Financial Future

January 14, 2020 at 4:04 PM

The Pearl of Life:  Preparing of a Financially Secured Retirement 

There is a famous blessing which states, “may God bless you with long life and good health.”   According to the UN – World Population Prospects, that blessing is being fulfilled in Ghana as longevity is improving steadily with the average life expectancy of 64 years for men and 67 years women.   Life expectancies today have improved by 40 additional years since 1950.  With this blessing comes the responsibility to financially secure our future.  Only 5% of Ghanaians have retirement income.   How sad is it for hard working individuals to live long lives only to depend on children, loved ones and even the kindness of strangers to assist with basic living needs.  In fact, one of the biggest risks we face as we age is that we will outlive our savings.  I am pleased to provide solutions to ensure that your blessings include the securing of a retirement income.  This income will not only provide for your living expenses, it will also allow you to pass on financial security to future generations.

Focus on Starting Today

It is important to remember that making wise financial choices will give you the freedom to do more, enjoy more and live generously – today and tomorrow. Whether you are self –employed or a salaried worker, it is time to take control of your finances by increasing your participation in the pension system.  Whether you are young or not so young, whether you’ve been saving diligently for years, or if you’ve gotten off to a later start, there are many ways you can make catch-up contributions to your retirement savings.

 

The Defined Contribution scheme of the pension system places more responsibility on workers to ensure the adequacy of their retirement income. The 3-tier pension system established under the National Pensions Act 2008 (Act 766) has expanded opportunities for savings toward retirement in Ghana.  These avenues include the mandatory schemes (tier 1 i.e. SSNIT and tier-2 occupational pension) and the voluntary tier-3 scheme (Provident Fund and Personal Pension).

 

It is highly recommended that workers make additional contributions towards retirement, including the tier-3 scheme.  This will allow you:

  • Supplement your retirement benefits
  • Earn interest on the money you have contributed
  • Save automatically. Simply specify how much, and the amount will be automatically deducted from your paycheck and deposited to your plan account — before you ever see the funds. 
  • Reduce your current taxes. Your contributions are made with pre-tax money; therefore, you reduce your overall taxable income, which adds up to considerable saving

 

When you save in a retirement plan, you are putting the power of tax-deferred compounding to work for you. Your money can grow faster because earnings that could have been taxed get reinvested and earn even more. In addition, if your budget permits additional savings, the power of compounding interest can yield considerable savings in after tax choices such as savings accounts.  Speak to a financial  professional to learn more. 

Key facts to remember

  1. Longevity: You may live quite a long time in retirement. Longer than you expect, in fact. If you’re one of the many people who underestimate how long you’ll live in retirement, you may find yourself running out of money.
  2. Expenses: Some people find that their expenses decrease in retirement — their house is paid off and children have moved away. But many others find that their dreams for retirement come with big price tags. Depending on your retirement goals, you may need a minimum of 70 to 80 percent of your pre-retirement income.
  3. Basic National Social Security may not cover all your retirement expenses.  You will need to supplement your income from other sources, like personal savings and pension plans.
  4. Inflation will reduce your retirement savings.  Remember the cedi may buy a lot less in the future than it does today.
  5. Start now:  It is never too late to start planning for retirement.  Speak to your financial advisor or call Enterprise Trustees for free advice about setting a goal and the savings required to reach your goal

 

 Retirement is the grand finale in life.

Retirement is the grand finale in life.  After years of savings, it will be time to enjoy what you have worked so hard for and reap the fruits of your labor.  This will only be possible if you seize the opportunity to participate in the pension system and increase your retirement savings.  Enrollment and additional savings can be made conveniently through downloading the Enterprise app. You can also sign up by dialing the short code *714*333# and follow the prompts. As the blessings of good health and life are fulfilled in our lives, let’s financially secure our future.

 

Grace Vandecruze is the Founder and Managing Director of Grace Global Capital LLC, a financial services firm which specializes in advising insurance companies on strategic and innovative initiatives.  She also has a passion for teaching financial literacy and financial empowerment.