We all need to plan for our futures and that of our children. Saving for retirement or education is essential, especially if you want to achieve financial independence. This should be a concern for all Namibians in their journey toward economic self-reliance.
Live a dignified life in your old age by ensuring that you do not have to rely on friends, family and the government for daily expenses when you cannot work anymore.
Furthermore, give you children the best chance at success.
This is where advisors and proper planning play a role and if approached and set-up correctly, it’s very tax efficient as well. Government created a tax deduction with regards to retirement and tuition costs so that people can plan for their ‘golden years’ and for their children’s education. Most people are not even aware of this option and certainly don’t take advantage of it. Even though they really should. It’s sound financial planning and certainly something any tax or investment/pension consultant worth their salt would advise you to do.
The current tax deduction amount a person can save for their retirement or for education is N$40 000 per year. Use it or lose it. This benefit lapses at the end of the financial year and starts again with the new year. It is therefore vital that one ensures that you make use of the allowance every year before the 28th of February.
In Namibia the average retirement age is around 60 and making provision for your livelihood for perhaps another twenty or even thirty years is a major and daunting task. Financial planning becomes essential. At present, most Namibians cannot maintain their standard of living upon retirement.
The same applies to saving for future education. The earlier you start with making provision the easier it is, and the more chance the investment has to grow. Compound interest only works if you start early.
One way of saving for your pension is with a retirement annuity, a product that is specifically set up to invest deposits and grow funds from an individual. Together with your investment advisor this annuity is set up in such a way that upon maturity of the contract it pays out on a regular and consistent basis to supplement your pension.
People are often disappointed upon reaching retirement and finding out that their pension fund is not sufficient to keep them in the lifestyle they are accustomed to.
By being proactive and developing a financial plan together with your financial advisor it is possible to reach your financial goals, including a comfortable retirement. Maintaining the quality of life to which you have been accustomed to, far into your retirement, or anticipating the future academic achievements of children and grandchildren can now also be secured with educational policy investments.
The financial planners and tax advisors are there to guide you every step of the way and assist you in an investment format for your retirement and educational future that works best for your situation, whilst ensuring you reap the maximum benefits of available tax exemptions.
*Theodore Stanley is a Financial Advisor at Sanlam Namibia