Are you assuming that the money your company is taking towards your retirement is enough for you to live off?

It's one of the biggest responses I get… I've ALWAYS contributed to my company pension scheme.. never cashed it in, and they take what I need... so I don't need to invest additionally…

The truth is... they're not... and they are no where near taking enough for your retirement...

So if this is one of your assumptions, you need to strap in and listen up to this little episode..

Show notes:

• [03.18] Your company has NO idea of the kind of retirement that you want to have.

• [06.00] You need to know how much you have in your company retirement fund.

• [07.40] The growth that goes towards fees.

• [10.08] Present bias.

• [12.12] Income tax.

Quotes

"When you look at the money that you're actually contributing, you need to make sure that all of it is going to your retirement." - Lisa Linfield

"The growth number they'll often give you is the number after investment fees if you're lucky, but not after all of those costs that goes to administer the company scheme and the advisor fees and all those other things." - Lisa Linfield

"There is very little you can do when you've found out you don't have enough when you're just about to retire." - Lisa Linfield

"Time is the master of growing your money." - Lisa Linfield

"When you're considering a new job, you need to compare apples with apples, in terms of the money you're getting in." - Lisa Linfield

Related posts and episodes

• How much is enough to stop work?

• Is it too late for me to save for retirement?

• Employee retirement funds

• How to fast track financial freedom at any age

• Optimising tax on your investments

• How the investment industry hides fees...
  

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TRANSCRIPT

Are you assuming that the money your company is taking towards your retirement is enough for you to live off?

It's one of the biggest responses I get… I've ALWAYS contributed to my company pension scheme.. never cashed it in, and they take what I need... so I don't need to invest additionally…

The truth is... they're not... and they are no where near taking enough for your retirement...

So if this is one of your assumptions, you need to strap in and listen up to this little episode..

When I was about to get married, one of my dear friends, Vix gave me a piece of advice I've cherished and shared with my friends, that she was given just before her wedding…

Men aren't psychic... You need to ask for what you need.

Just this morning, as I lay sick in bed after a tough night of coughing, feeling really yuck about life and my body, I had one of those Allie MacBeal moments when I wanted to throttle my husband.

He was getting up, getting dressed and getting ready to go row - and giving me a detailed account of all the things he'd repaired from his boat yesterday and how he needed to put them back into his boat before he began rowing.

WTF sprung to mind, and in words far more colourful than that.

Not once did he ask me how I was... or feel sorry for me, or offer to bring me tea in bed.

And then I heard Vix say... He's Not Psychic. You need to ask for what you need.

He has no idea you're still feeling crap, and no idea you're dying for tea... especially tea given that you never ever drink it.

So, instead of being angry all morning, save both of you the hassle and just ask for the tea.

This happens regularly, and i now even go so far as to say, "Love, this is where you ask me how I'm doing and if you can get me anything before you go row..."

So here's the first point on your company.

1. Your Company has NO idea what kind of retirement you want to have (so how can they know how much you need?).

Do you want to retire in New York, or do you want to retire in a little beach cottage on the west coast with your home grown food?

1. In order to know how much you need for life when you stop working, and therefore whether what your company is saving enough, you need to first be clear about both your ideal life when you stop work. And I'll let you in on a little secret - very few people know what they really want, and almost no couples, when you ask them separately to dream an unconstrained vision, have the same view of retirement. It's just not something we talk about.

2. Once you know what you want, you need to cost it in today's money. Amazingly, this is much easier to do than you think. One of my "add ons" for retirement is to spend 3 months in the country my girls are living in... so I literally went to airbnb and costed a 3 month long stay in the UK

3. And once you know what you want, have costed it, can YOU then start to know how much you need... and whether your company retirement alone will be able to make it...

So … do you know how much you need to have invested in order to stop working?

I have made a quick, easy to fill out sheet that needs you to plug in a few numbers - like how old you are, when you want to retire, how much money you need to live off, and how much money you have

Download it now

2. Not all the money the company deducts ACTUALLY goes to investments...

Once you know how much you need, you need to know how much you have with your company retirement fund… how much you're actually contributing to retirement and not other things each month, what it's growing at, and how many fees you're paying.

Now this is really important

1. People will often say they're investing R3,000 and it's 13%... And when I ask them to ask HR if all of it goes to their retirement, the answer is No… 3% goes to their death and disability policies, and 10% goes to their pension... so only 2,300 is going to pension. So when you do your calculations, you can only put R2,300 in as the contribution

2. When you look at how much it has grown, be sure that the growth is after ALL the fees... now episode 213 went into fees extensively... what you need to know here is that the growth number may be given to you after investment fees, but not after the administration, company scheme, and work adviser fees.

A few years ago I got a 56 year old new client who planned to work not one day past 60. To say he resented work was the under statement of the year.

I remember asking him if he believed he had enough to stop work, and he was absolutely adamant… He'd done every single thing the books said - contributed to his company retirement scheme, never cashed it in, and so therefore he would definitely had enough.

When I showed him how far short he was from retirement and that he would need to at least work until 65 and cut his cost, he was so angry, he exploded in a rage.

He had been holding on for 60 with everything he had, and the thought of extending that for 5 years and getting less than he expected was too much to bear.

Now I am a world champion at digging my head in the sand. Sometimes I feel on some issues I'd have dug my head so far into the sand that I would surface in New Zealand!

The thing is, there is very little you can do when you find out you don't have enough when you are about to retire... and a lot more you can do with more time... because time is the master of growing money.

So wouldn't knowing if your company is saving enough or if you need to invest more help you to start now changing the course of your life to live financially free?

Truly friends… just download my free worksheet and KNOW… it may not be an easy answer, but over time that knowing will help you change course… it's literally putting in 4 numbers.

So… where were we…

1. Your company has no idea how much you need in order to retire… so they can't know whether they're taking enough

2. The money they do take from you often goes to not only funding your retirement, but also your health insurance or your death or disability insurance

and here's the third thing...

3. They know if they put less to your retirement, you'll feel like you get more in your bank account for NOW

We as humans have a thing called 'present bias' which means we weigh more heavily things that help us today than things that help us in the future.

So… when the company comes to offer you a job, and you are going to receive 10% more into your bank account each month - you generally tend to take it, believing it's a better offer.

But often what happens is that some of that difference is because they are contributing less to your retirement fund, so more of your money is reaching your bank account

One of my clients brought me two offers from two new companies she was interviewing with…

When we went through the numbers and discovered this exact thing - that her existing employer was contributing 16% to her retirement and one of the new ones was contributing 9% and so 7% of the "extra money" was in fact taken from her future... she was livid.

Once we'd talked through it, she was able to assess the opportunity for what they are worth and not get side-tracked by numbers.

She still ended up taking the new job with the crazy numbers... because the opportunity was better... but took that 7% and invested it for her future.

So make sure that when you're considering a new job, you compare apples with apples in terms of the money you are getting.

So…

1. Your company has no idea how much you need in order to retire… so they can't know whether they're taking enough

2. The money they do take from you often goes to not only funding your retirement, but also your health insurance or your death or disability insurance

3. People don't want them to take alot for their retirement so they can have more now in their bank account

And lastly, here's the fourth reason...

4. When you come to retire, you will still pay income tax... (and your company has no idea what that will be)...

This is the one that still gets everyone… even the bankers who are my clients…

Because you don't pay tax now on your income going to your retirement fund, you will pay it later on… when you need to use it.

Full income tax…

So what you think you have is actually not what you have

When my twins were little, I was interviewing for an au pair that could look after them and Jess after school when I was still at work.

I'd had the younger ones who, naturally, left to pursue exciting opportunities, so now I wanted retired lady.

When I asked one of the ladies I was interviewing why she needed to work in retirement, her response shocked me...

She'd been told she had enough money to retire... so she did.

The problem was, the calculation missed two things

1. Medical aid or insurance - because she hadn't factored that expense into the calculation because the company had taken it as a deduction her whole life, so she never paid it, and assumed it was part of the pension fund payments

2. Tax... the calculation had missed the fact that she paid income tax on the money she drew, so she had 25% less money than she thought she had.

So please friend when you think about your retirement and what you have, you need to remember that you have to factor in tax on any retirement funds you have that you didn't pay tax on when the money was contributed.

If I've just got you to start questioning whether the assumption that your retirement fund is taking enough… then my job here is won… because that will start playing in your brain, and cause you to ask the questions…

So there are three steps I'd like you to take now

1. Send an email to your HR person and ask them how much you have in your work retirement fund, how much it's grown by after fees, and how much you contribute each month to it

2. Download my quick worksheet on LisaLinfield.com/howmuch and work out how much you'll need, if you're contributing enough, and whether that contribution will get you to the retirement you're wanting…

3. Get your HR person to push up your deductions, or start investing more by yourself...