Investment planning


We often focus on planning on risk – dying too soon or illness and/or disabilities.  What about the risk of LIVING TOO LONG?

Interesting facts regarding Retirement Annuities

  • According to statistics, only 10% of our population will be able to retire comfortably.
  • There has been a shift from traditional defined benefit funds to defined contribution funds – benefits are dependant on investment performance rather than salary percentages.
  • Most people change jobs several times – not reinvesting the pensions after resigning, but rather spending the payout!
  • Changing jobs with have NO effect on your retirement annuity.
  • New generation retirement annuities shows immediate investment growth as costs are spread throughout policy term.
  • Some companies now offer GUARANTEES  on paid up values.
  • Any excess tax not recovered in a tax year will be tax free upon retirement.
  • One third of your retirement annuity is paid out in a lump sum and the rest is reinvested providing a pension for the remainder of your life.

How much is enough?

  • Your investment should be enough to last you until death and then in most cases, carry on to provide for your dependants
  • Example:
  • Let’s say you are a member of a fixed contribution retirement fund or retirement annuity and your last month salary after deductions amounts to R8 000, you will need approximately R1 200 000 in retirement capital based on 12,5 times your final salary.
  • If you invest your R1 200 000 at 12 % per year, your should show a real growth of 6 % after inflation calculated at 6 %
  • This should provide you with an income of about R6 000 per month.
  • Even with the good investment of R1 200 000 you still only have around 75 % of your normal monthly income.
  • Clearly you will have to adjust your standard of living.

The best time to start saving for retirement is when you start earning money. The reason?
The super multiplying power of COMPOUND INTEREST.

The simplest way to explain compound interest is when invested correctly, you will be receiving INTEREST ON YOUR INTEREST!

The more interest you earn, the more your money grows.