Retirement is a major milestone that brings many life changes. Once you step away from the grind of daily employment, you suddenly have plenty of time to embark on new adventures, whether it's travelling the world, investing in real estate or simply spending more time with your family and friends. The only downside is that your meagre state pension will only stretch so far. In many cases, it just won't be enough to maintain your pre-retirement lifestyle, especially when you factor in all the extra expenditure:
- the loss of your corporate-sponsored hospital plan
- rising medical costs as you get older and need more services
- no more luncheon vouchers
- the loss of fringe benefits such as a company car
Fortunately, if you had a group insurance plan through your employer, you can cash in on this extra nest egg when you retire. When you add any additional retirement or long-term savings to your total pension pot – statutory and complementary retirement benefits combined – then you're probably in good financial shape.
Important tip: figure out for yourself how much you'll need per month to retire without worry or regret, and don't wait until after you've retired. This is an important exercise that involves estimating different inputs such as the length of your retirement and how long you expect to remain in good health but also how much to set aside for home maintenance or improvements and whether you have major expenses in the pipeline (e.g. buying a new car).
Once you've monetised all these factors, you'll have a good idea of how much you'll need to live comfortably and how much will have to come out of your pension pot. Based on your calculations, you may decide that you don't need to use any or just a small portion of your group insurance proceeds to achieve your retirement goals. If this is the case, reinvestment may be a good option.