Need a Retirement Plan? Speak to one of Our Professional Consultants to work out a plan to suit your needs and budget. In years gone by, financial planning for what is often referred to as your ‘golden years’ was rather straightforward and simple. Most people worked for a company that offered a defined benefit pension and when, after years of long service, a person was ready to retire they could look forward to receiving a decent percentage of their old salary every month. Of course, some also had the foresight to save and invest on their own too, so that they could travel, or buy a vacation home, but most people did have the stability of their company pension to rely on.
Those days are now long gone. Many people work for a number of different companies over the course of their careers rather than just sticking with one as their parents or grandparents did and so they never quite qualify for a pension plan. If there is one on offer at all that is, as many companies struggle to afford this kind of thing, especially as life expectancies – and therefore payout times – have increased over the years.
These days we all Need a Retirement Plan
Providing For Your Own Retirement
All of this means that many South Africans now have to provide for their golden years themselves. There are many options to choose from but understanding these different products is crucial, as making the wrong choices may mean that you end up missing your retirement goals.
With this in mind, let’s take a look at some of your options.
Retirement and Living Annuities
If your company does not offer a pension plan, you do not qualify or you are, as an increasing number of people are, self-employed, an RA – retirement annuity – should probably be a part (but only a part) of your investment portfolio. RA’s are actually very similar to the old company pension plans. They are tax-deferred savings plans; you just have to make all of the contributions yourself.
A living annuity is somewhat different. This is a unit trust portfolio from which you may withdraw five percent to 20 percent annually after you retire. Most financial advisers would say that you should always withdraw a percentage which is lower than the expected growth of the portfolio, leaving the capital intact.
Fixed deposit and money market accounts
These bank based accounts are quite flexible and may provide a hedge at times when interest rates increase. There are lots of different variations of these saving products and the person to best provide you with the best guidance on these is an independent financial planner.
Endowment Policies
This is a savings plan that is taken out with a life insurance company, typically for the term of five years. Over the lifetime of the investment, the insurance company distributes the money you pay in across a range of investments like stocks, bonds, real estate and cash. They also handle all of the tax liabilities.
Playing the Stock Market
Investing in shares in the stock market is probably the one thing that people are afraid of that they should not be, especially if they are hoping for a nice comfortable retirement. Yes, there are risks involved but the returns can be far more significant than those offered by the more conventional ways to save for retirement.
With the help of some self-education (the Internet is a huge resource there) and a little professional advice anyone can get into stocks. You can even get into offshore investing. Stocks should not be your only investment but they should be considered for addition to your overall savings portfolio.
We all need a retirement plan and the best way to get the right plan for your circumstances is to speak to one of Our Professional Consultants
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