Category: Chartered Blog

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Retirement Planning for women – the different concerns and considerations

Bronwyn Seaborne of Business Day TV hosts Kim Potgieter, Director and Retirement Life Planner at Chartered Wealth Solutions as they tackle the issue of retirement planning specifically zoning into women and the different considerations you should take into account as women planning for retirement.

Access part two of the discussion here.

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When a loved one can no longer manage their financial affairs

When Sue’s planner noticed that Sue was becoming increasingly forgetful and tended to repeat herself in meetings, she realised that she would need to discuss this with Sue’s daughter, Elaine. Both Sue and Elaine had been clients at their financial planning company for some time.

‘How will I break it to my mother that she has to be certified as mentally incapable of managing her own affairs?” was Elaine’s response. She was devastated and felt overwhelmed by the weight of it all. Where to start?

Elaine decided to take over the administration of her mother’s affairs as her other sisters do not live nearby. Her already busy life became even more busy. Managing her own affairs and that of her mother’s proved to be extremely stressful. Paying bills, organising and managing carers and drivers, arranging meals, booking and attending doctor visits became the norm.

Elaine also had to take responsibility for Sue’s investment portfolio in addition to her own. Her planner encouraged her to consider handing the administration of Sue’s matters over to a professional administrator and made the necessary introductions. Elaine was reluctant at first, feeling that she was somehow letting her mother down; however, following her first meeting with the administrators, she realised that it would be in everyone’s best interest to engage their services.

Since then Sue has been moved to a retirement facility. Sadly, but not wholly unexpectedly, her mental state has deteriorated, so she requires full-time carers. Elaine takes comfort in the additional support offered by the administrator.

Sue is very fortunate in having a daughter nearby who is able to come to her aid. This is not always the case and having a conversation with your planner sooner rather than later is a critical part of your financial plan.

Prepare before the crisis

Penny is a client who has taken it on herself to look after her disabled mother’s affairs. “This handover of responsibility was organic, but I think, if personalities permit, it would be better to discuss these things with ageing parents before the necessity arises. Once there is a crisis, emotions run high, and you don’t know if the person will be in a fit mental or physical state to make such decisions.”

Perhaps open the discussion in this way: “As you are getting older, the possibility exists that you could have a stroke and not be able to talk or manage your affairs. It may be a good idea to sign a Power of Attorney together. Then, should the need arise, that would enable me to pay your bills and get what you need, without you having to fret about it.”

Encourage your children to attend at least one or two planner meetings with you to discuss plans whilst you are still mentally healthy and alert. It is an onerous and traumatic process for all parties concerned. Says Penny, “Considering increasing longevity and older people’s seeming denial about their stage of life and what lies ahead, with hindsight, I would have raised the subject much earlier about what would happen when my parents got older. I think it would have been helpful to introduce the idea of possible reduced independence and what strategies should be adopted if that were to occur. Perhaps even trying to get them to agree to go to look at different options at that time, so that they could see what they thought might work form them.’

Why not have this discussion, difficult as it may be, with your financial planner, so that you are equipped with the necessary information well before you may need it.

Article by Christina Forman, Certified Financial Planner and Retirement Specialist at Chartered Wealth Solutions. Read the first article in the series from both Christina: Plan for when you can no longer plan and her client who shares the implications of being a parents’ tax consultant and having power of attorney.

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Effects of the proposed wealth tax in South Africa

Wealth tax is a hotly debated topic, especially since South Africa’s taxpayers are already overburdened. So, the invitation from the Davis Tax Committee (DTC) for public submissions on the desirability and feasibility of such a tax has placed the issue squarely in the limelight once again.

The Government is understandably keen on this idea as it needs more revenue to fund the bloated civil service, sustain high levels of other wasteful (and often corrupt) spending, and avoid the policy reforms required to stimulate growth.

Globally, wealth taxes have steadily declined in recent decades. By 2010 wealth taxes only existed, on an ongoing basis, in three member countries of the Organisation of Economic Cooperation and Development (OECD). South Africa has a tiny tax base, and is heavily dependent on a small group of individuals and companies that pay around 60% of the personal and corporate income taxes collected each year. It is feared that imposing a wealth tax on this small group could encourage a flight of capital and skills which would further weaken the economy.

Leeching land-owners

The proposed forms of such a tax in South Africa may include a land tax, and an annual wealth tax. It is assumed that by a land tax is meant an annual tax on the value of land.

It is hoped that at least primary residences should be exempt from a land tax. This would be in line with the way primary residences are treated differently from other fixed property for purposes of Capital Gains Tax (CGT). The justification for such an exemption is rooted in the fact that private ownership of residential property is an enabler for wealth creation, something which is desperately needed in South Africa.

There is the question of what other land should be excluded? Normal exceptions of land for recreational, educational, religious and charitable purposes, should be considered. Agricultural land should also be considered in order to avoid a further burden on already thin profit margins. Famers in some areas, for example, the Karoo, are notably asset rich and cash poor. An annual tax on land will place them in an even more serious cash squeeze.

If an annual land tax is levied on rented residential property, this sector will experience upward pressure as landlords will pass such a land tax on to the tenant, which will increase pressure on already stretched middle class citizens.

If there is to be a threshold value on such property, what should this threshold be? There is the possibility that an extremely wealth person with several pieces of land valued at below the threshold will effectively escape the tax.

Many elderly people hold onto their family homes. These homes can have quite a high value due to market movement, but their elderly occupants can be quite cash poor. This reality is recognised by many local authorities with special discounts on municipal rates for the elderly. If such a tax were levied, it would force elderly people of out of their homes. In addition, quality accommodation in retirement villages has increased by far more than the average increase in property values. Imposing this tax with too low a threshold will prejudice this already financially vulnerable sector of the population.

Are you one of the few?

The complexities of an annual wealth tax are daunting. To qualify as a tax on wealth, the net worth of the taxpayer will have to be determined on an annual basis. This will become an enforcement nightmare from a SARS point of view.

A further question is at what net worth does a person qualify as wealthy? This question has different answers depending on the life stage and circumstances of the individual. A 35 year old with R15m may be regarded as wealthy. However if the 35 year old is disabled, this is not a large amount of money. At age 65, upon retirement, if the R15m is the sole source from which income must be produced, it is similarly not a large amount of money. If an annual inflation-linked income of R850,000 per annum is being drawn, it is expected to last less than 25 years.

Very few developing countries have an annual tax on wealth. Developing countries, by their nature, need foreign direct investment to grow and develop their economies. They need to be attractive to investors to bring that desired level of foreign investment to grow and develop their economies. Extra taxes are always a deterrent to capital inflows.

Currently in South Africa, taxpayers with a taxable income in excess of R1m make up only 3.5% of the taxpayers, while contributing 38.5% of the income tax revenue. Ultimately, South Africa, like all developing countries, needs more growth and not more taxes.

The words of Winston Churchill are a sober reminder: “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”.

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Vote for Retire Successfully!

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Plan-for-when-you-can-no-longer-plan-Christina-Forman-Certified-Financial-Planner-and-Retirement-Specialist-Chartered-Wealth-Solutions

Plan for when you can no longer plan

Recently, my client admitted that she is no longer capable of managing her everyday financial affairs. How can you and your planner prepare for this, should it happen to you?

Dr Sylvia Kree turned 91 recently and has many interests. She also still goes to gym regularly which helps her keep fit. “It is your responsibility to look after my financial affairs, and my responsibility to look after my health,” she regularly says to me.

Of late, Sylvia finds it difficult to manage daily financial matters, like banking, and she is daunted by the fast pace of changing technology. She also does not have any children and her nearest relative lives in the Cape. ‘Who will look after me when I am not capable of doing so myself?’ she asked.

Sylvia and I discussed appointing an administrator over her affairs. Sylvia agreed. “It’s comforting to know that my affairs are in capable hands. I feel reassured and confident that you are there for me, even now,” she says. “I do not understand all the financial terms, and also cannot retain that kind of information. So having someone taking over that responsibility is a huge relief.”

Start thinking about your wishes should this ever happen to you. Prepare for when you can no longer care for yourself. Take time to look at retirement villages and facilities before you need to – where would you like to stay? Do you want to move only once? Then choose a village with assisted living and frail care facilities – most of these cover that cost by a life rights arrangement. Talk this through with your spouse and your planner so that you are prepared before you are compelled to move because of injury or illness. Many of these establishments have waiting lists in excess of two to five years, so choose where you might like to live and put your name on the list – there is no obligation, so you can change our mind.

By thinking this through whilst you are still capable of contributing to the conversation will make the process so much simpler and in line with what you want.

When do you institute a power of attorney?

If you leave it too long, and there are early signs of dementia, a power of attorney may not hold. Under current legislation, the power of attorney would not endure in situations where you are no longer able to understand the impact of such consent. Rather pre-empt the situation and be prepared for such an eventuality.

Consider whom you would entrust with a power of attorney.

Build additional costs in your financial plan for such a situation. The cost and strain on family members can be overwhelming. The carer or child has to go through an onerous process to be appointed administrator or appoint a third party as administrator and/or curator.

Planners can facilitate and advice around these matters, having established relationships with administrators and curators. Experienced planners have been through this process before, and are aware of aspects of planning that you may not be. You should have a trust relationship with your planner that ensures that he or she is planning in your own best interests … and a time when you are most vulnerable should be no different.

Article by Christina Forman, Certified Financial Planner and Retirement Specialist at Chartered Wealth Solutions. Click here to access the second article in the series: When a loved one can no longer manage their financial affairs. One of our clients also shares their personal experience of the Implications of being a parents’ tax consultant and having power of attorney.

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Minding your Ps and RAs

So, you have been saving faithfully towards your retirement. You are confident that you have enough stashed away in the various investment vehicles: RAs, Pension, Provident, Preservation, Unit Trusts … and now, you salary has come to an end. How do all of your investments come together to give you an income … and what are the tax implications? Certified Financial Planner, Pat Blamire, chats to Michael Avery on the Classic FM’s Classic Business programme, to help retirees get the most out of their retirement savings.

Click here to access the Classic Business radio discussion.

Kim-Potgieter-Retirement-Life-Planner-and-Retrirement-specialist-at-Chartered-Wealth-Solutions

When work meets wonderful

It’s a wonderful thing when someone loves what they do.

I’m grateful to say that I am one of those people. Each day, I wake up with a clear sense of purpose and passion, knowing that I get to go to work and do what I love. Supporting my clients in their retirement journeys means everything to me. My clients, many of whom I’ve built meaningful relationships with, are on their way to aligning money with meaning in their lives. And honestly, nothing makes me happier.

But feeling this way about my work – about who I am and what I do – didn’t happen overnight. It has literally taken me years, years of introspection and insight. I’ve had to spend a lot of time looking inside myself, accepting who I am and exploring who I can be. And then I’ve had to take time to look outside of myself and to consider the contribution I make in the lives of others.

Having travelled this road of self-reflection, I can say with conviction that it is worth every well-worn step – even if the destination isn’t always clear at the outset.

A retirement that works

Part of what I do in my work is to encourage conversation. Some of the conversations I have with my clients are about work in retirement. Many of them have found work that they are passionate about, which is incredibly exciting to see.

My husband is one of those people. At age 57, Gys found his next career. Well, that’s not entirely true. He re-found his career because it was when he was a young school boy that he started this particular kind of business – hand-making wooden pencil boxes and selling them to his school friends. This developed into making lamps and little side-tables and at the age of 16, he walked bravely into Tony Factor’s factory to show him some of what he’d made. Tony bought everything he had. And so began his career. His business grew to 350 people, with his company making furniture for the likes of Game, Dion and Pick n Pay. This type of business growth meant that he no longer got to use his hands. Instead, he was heading up a big business, managing people and managing money.

Work: it’s a pleasure

Ten years ago, he sold his business and selling woodworking machines has been something he’s been doing ever since. But all my talking about passion, purpose and finding pleasure in retirement got him thinking (Who knew he listened to me!). He decided build a workshop at home so he could work with his hands once again. Owning a woodworking machine business made it possible for him to set up his dream workshop – with machines that most men would kill for! Gys didn’t realise how much he had missed working with his hands – and with wood. This latest venture saw him making things like jewellery boxes and trays. But now, a year in, he’s back in business, making bespoke furniture with beautiful, indigenous wood for commissioning clients. Finding his way back to the work he loves has invigorated him. He knows what he loves. And doing what he loves will be focus for him in the decades ahead, as he starts to leave a legacy with his beautifully handcrafted pieces.

What stands out about people who create encore careers is the way in which they all light up when they talk about their work. Their enthusiasm and excitement are contagious. They live in a place where work meets wonderful. Where do you live?

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Chartered family fun in Port Elizabeth

This May, Chartered Wealth Eastern Cape clients were treated to an evening at The Club on 12 Bird Street in the company of master raconteur, Rob Caskie.

While his audience enjoyed a sumptuous dinner and warming winter drinks, Rob wove a terrible tale of the Anglo-Zulu clash at Isandlwana. As a Chartered client himself, Rob used this account of the most dramatic British failure in battle to demonstrate the need to plan carefully … whether in the military or with money. Both can equip you to prepare for the unexpected.

Chartered Wealth Eastern Cape CEO, Donovan Adams, welcomed the guests to the historic The Club on 12 Bird Street. Pre-dinner drinks were enjoyed in the wood-panelled bar dating to its Victorian origins, with a comforting fire burning in the grate. The Club is a regular local venue for various community events, including Music Trivia evenings and High Teas … and this evening in May was no different, as the Chartered family in the Eastern Cape mingled and enjoyed catching up with fellow clients. Visiting from Johannesburg was Chartered Director and Retire Successfully brand ambassador, Kim Potgieter.

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Moving from loss to a place of healing

“Without you in my arms, I feel an emptiness in my soul. I find myself searching the crowds for your face. I know it’s an impossibility, but I cannot help myself.”

These are heartfelt words from Nicholas’s Sparks’ novel, which was made into the famous movie, Message in a Bottle. The character who writes them is Garrett Blake, a man who lost his wife.

Death. Grieving. Emotive subjects and ones not easy to talk about. And yet all of us have, or will have, the experience of losing someone we love. It’s one of the few things about life that we know to be true – that life itself will come to an end.

No one can ever prepare adequately for this type of loss. It’s exactly as Sparks describes it – an emptiness in the soul. I know because I’ve felt it.

My personal loss

I lost both my parents before either of them had a chance to reach the age of 64. And I lost them in very different ways. My father’s death was sudden and tragic. He was killed in a senseless way – not that death ever makes “sense” to us, right? The victim of a hijacking, my dad’s life came to an end in an instant, before I had the chance to say goodbye to him.

My mother’s death was different but it was no less traumatic. She was diagnosed with pancreatic cancer and her passing took a lot longer than a moment. But even nine months, the length of her illness before she died, feels like a moment in time when you’ve spent a lifetime loving someone. That is how I felt about losing her.

Death isn’t easy to talk – and it’s not easy for me now. But I’m writing about this difficult subject because I’ve just watched a client go through something similar. It brought back the memory of my experiences – the trauma of everything. But also, those truths that death has taught me.

As painful as it was to watch her suffer, my mom’s illness allowed us a little bit of time together. And what I wanted to do most with that time was to make things better for her. And believe me, I tried. I tried to step in and fix.

At one appointment with her specialist, during which the she was talking us through some last treatment options for Mom, I interrupted to ask questions, ready to plot an immediate plan of action. Of course what I was doing was coming from a good place – a place of love and wanting to make everything better. But my directness, my decisiveness – well, they made my mom feel as if she wasn’t even in the room.

Freedom to choose … and surrender

My mother was someone who hardly ever scolded me. But in that moment, she spoke up. She said calmly but very powerfully to me that she was the person who was dying. And so she should be the one to choose the journey of her passing.

Wow. What a milestone moment that was for me.

Her speaking up made me stand back and begin to support her in the way that was meaningful to her, not me. She didn’t need me to control the situation. At the end of the day, the universe was in control. All she needed from me was for me to hold her hand as she chose the journey of her own passing.

And so when my client phoned me in tears the other day about something similar that she was facing, I was able to share that story with her and talk through the importance of acceptance as her new starting point for love.

Yes, it’s hard to hold back when you want to fight. There is very little dignity in death and yes, let’s rage against it for as long as we can. But when raging is not what is needed of you, when it’s time to take a breath and surrender to what is – then oh, what an honour to be allowed into the inner circle of your loved one’s last wishes.

The two faces of grief

This is just one of the lessons that death and grieving have taught me. The author Sarah Dessen writes: “Grief can be a burden, but also an anchor. You get used to the weight, how it holds you in place.”

If you are in pain – the pain of watching someone you love suffer – let yourself be anchored by the weight of grief. Be open to what your tears want to teach you about the people you love. And about yourself.
Grief is such a raw emotion to deal with that I am deeply grateful to clients, Ronelle Baker and Kathy Lithgow, sharing their stories. The April Inflight newsletter was compiled with the hope that something will help those who are grieving towards some healing. Access the full newsletter by clicking here.

#MakeThisTheYearForHealing

Warm regard

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Policy uncertainty should not change your long-term financial goals

Last night, a 5.2 magnitude tremor hit parts of Gauteng, the second in 24 hours. It seems a fitting reflection of the monumental economic and political shifts that have hit South Africa since Thursday last week. First tremor: cabinet reshuffle; second tremor: downgrade to junk status by ratings agency, Standard and Poor’s, from BB+ to BBB-. Moody’s has placed us on review for a downgrade. The rand has fallen 2% since the announcement of the downgrade.

Reasons for the downgrade
According to EWN, S&P’s rationale is as follows:

  1. The cabinet reshuffle reveals leadership divisions and puts policy continuity at risk
  2. Poor financial performance of government parastatals places greater strain on government
  3. Government and ANC divisions inhibit investor and business confidence and action
  4. Slow economic rate, reflected in the contraction of 0.3% in the last quarter of 2016.

Slender positives

S&P has noted the independence of the Reserve Bank and South Africa’s monetary policy flexibility as positives.
S&P has also commented that the possibility of reversing the outlook to stable exists – dependent on the strengthening of fiscal outcomes and economic growth, and the reduction of political risks.

For all investors, it is a matter of maintaining a prudent approach and level-headed attitude to our financial planning, while we await the outcomes of this pronouncement. During times of uncertainty brought on by this and other downgrades, sticking to your long-term financial plan is critical. If you need further clarity, please don’t hesitate to contact us.

Warm regards
John Campbell

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