“I am a 31-year-old dedicated saver and I have two main savings besides my pension and I want to know if they are the right investments. I’ve been increasing these savings by 10% each year and putting some into my bond. Do you think this will give me the right returns seeing that you say we must save 20%?” asks Thabile.
Maya replies: As a quick summary you have a pension fund, a stock market-linked investment fixed for 10 years and a money market account for emergencies. You also add to your bond each month.
This is a healthy spread of investments as you are taking care of your basic retirement needs through your pension; you have discretionary savings into the stock market investment which you can use to supplement your pension or to provide you with options about your career and lifestyle; you have emergency savings and you are paying off your home. You have all the boxes checked!
As you have not provided the total savings I am not sure what it comes to but if you are saving 20% of your income in this manner you are definitely moving in the right direction. What I would suggest is that you meet with a financial adviser who can do an income projection for you based on your current savings. A lot will depend on how much you have already saved up to the age of 31. You probably took out your 10 year investment through an adviser who continues to receive commission so he or she should do this for you as part of their service.
This is also a good time to write down a financial goal for the next five or ten years. For example I have set a goal to pay off my mortgage within the next ten years. You then need to see how this goal fits into your current savings plan.
You need to review your financial progress every year partly because of market returns but mostly to ensure that you are taking life changes into account like marriage, change of jobs, children etc. In this way you will know exactly where you are and where you are heading.
For more Smart Money advice go to Maya on Money