Approaching Retirement? Here’s What to Do with Your Retirement Savings at ages 55 and 65

Reaching 55 or 65 is not just about milestone birthdays, rather these are major turning points in your retirement journey. At these ages, key financial opportunities and decisions can shape your future. You’re no longer just building up your pot of money, you’re preparing to protect it and use it wisely. 

Why does the milestone age 55 and 65 matter?
At 55, you can start accessing some retirement funds, including retirement annuities and preservation funds. At 65, as many conclude their working careers, retirement savings typically become their primary source of income, thus making it crucial to manage it wisely for lasting financial independence.

What to do around age 55

1. Shift to protection
Until now, you have been focused on growing your money. But once you reach 55, it is time to start protecting what you have built. That means shifting some investments from high-risk areas (shares) and into safer options (bonds, money markets). You do not need to go ultra-safe just yet but maintain a balance for stability. 

2. Keep Saving
Boost your retirement savings while you still enjoy tax benefits. SARS allows you to contribute up to 27.5% of your taxable income each year (capped at R350,000), plus R36,000 in a tax-free savings account. The more you save now, the more you benefit from compound growth.

3. Know the Rules 
Although you can legally access certain retirement funds at 55, think carefully before doing so, as early withdrawals can reduce both your long-term income and tax efficiency. For a retirement annuity, you can take up to one-third as a lump sum, with the remainder converted into a monthly pension. A preservation fund allows one full or partial withdrawal in your lifetime, so it should be used strategically.

4. Plan for Lifestyle and Healthcare
This is also the ideal time to start planning for the lifestyle you want in retirement, exploring ways to supplement your income such as part-time work or rental property. Reviewing your medical cover to ensure it will meet your needs in the years ahead.

What to Do Around Age 65

1. Turn Your Savings into Income

The shift from building wealth to drawing an income from it, is one of the most significant financial changes you will experience. You can choose between taking your savings as:

2. Balance Risk
Your retirement income may need to last 20 to 30 years, so your investments should still aim for some growth to outpace inflation while avoiding unnecessary risk. Striking the right investment balance is key. Reviewing the fees on your investments is also important, as high costs can quietly erode your savings over time. 

3. Withdraw wisely
One of the biggest challenges in retirement is making sure your money stretches as far as you need it to. Managing your withdrawals wisely is critical; drawing too much too soon can quickly deplete your funds. A common guideline is to limit withdrawals to 4%–5% of your total savings each year, but the right figure will depend on your personal needs, lifestyle, and market conditions.

Finally, a tax-efficient withdrawal plan, developed with the help of a financial adviser, can ensure that more of your money stays invested and working for you. By taking a thoughtful and disciplined approach at this stage, you can protect your hard-earned savings and enjoy the retirement lifestyle you have worked towards for decades.

Other Smart Moves Between 55 and 65

Plan today. Enjoy tomorrow.
Whether you are 55 and planning, or 65 and stepping into retirement, one thing is certain, “Do not leave it to chance.”  Plan today. Enjoy tomorrow. Your future self will thank you.

Reetesh Balgobind | Head: Finance

References:
https://www.moneyweb.co.za/
https://www.sars.gov.za/