Category: Chartered Blog

Caring for clients finds new expression at Chartered

I recently attended my 30-year high school reunion – what a bittersweet occasion.

I enjoyed reconnecting with former friends, reliving some fond memories and valiantly joking about those I would rather forget. What I did note is that time stands still for no-one, and the passing of time is evident in our hairlines (mine silvering, others gone!) and faces.

What has not disappeared is the very real sense of camaraderie that humans somehow create and sustain when they care about each other.

It put me in mind of the changes that are happening at Chartered Wealth Solutions … and the carefully considered rationale behind them. As always, our relationship with our clients is at the centre of them.

Here is a brief summary of developments that you, our clients, will be seeing:

New reporting

If you have been a recipient of the weekly Interest statement from us, you can expect to see a new and improved version, entitled Navigating the Tides, from 1 July. Our goal with this updated format is to ensure that you are informed regarding weekly market highlights, especially as they influence your investments.

“This new format is much more reader-friendly.”

For those who have previously unsubscribed from this communique (possibly because the method of reporting was too convoluted), we have resubscribed you in the belief that you will find this new format much more reader-friendly. Should you not wish to receive this communique, you are welcome to unsubscribe by clicking on the ‘Unsubscribe’ button.

In addition, we are developing a consolidated reporting statement on your investments – with the same rationale: to make potentially complex information much more accessible; this will comprise quarterly statements. You will be updated about this in time, but, you may chat with your RetiremeantTM Specialist in the interim, should you have any queries.

In-house suite of services

Many of our clients have engaged the services of our legal team over the years, in meeting their Wills and Trusts needs, and in resolving any Estate issues. Our Legacy and Trust team has grown and continues to give our clients excellent service.

In the latter half of last year, we welcomed Charmaine Prout and her team as Chartered Tax. As those clients who have worked with them can attest, they certainly go the extra mile … but you can read about them yourselves in the interview with Charmaine in this newsletter.

I have mentioned Chartered Invest in a former communique, and will continue to keep you updated on this part of our offering in the course of the year.

Finally …

In keeping with our mandate to help clients retire successfully, this issue of The Beacon includes a client story of Alex Isaakides, who, recently retired, has found meaning in a whole new area of interest. You can also read about our most recent client functions around the country.

Warm regards
John

Rising Strong

Kim-Potgieter-1-Retire-Successfully-brand-ambassador

Living a brave life is not easy. It is impossible to be perfect; life itself is not perfect. Brené Brown’s book Rising Strong has inspired me in so many ways to keep trying, to give ‘living’ a chance, despite the inevitable challenges and setbacks that life brings.

My journey to rising strong has not been a once-off event – learning and growing is a process. Brené’s book is a very personal and practical guide to embracing fear and failure and living a more courageous life. It often gives me courage when I find myself at a crossroad.

Those curve-balls life sends us

If we truly want to live and embrace life in its entirety, we have to be prepared for the eventuality that everything does not always work out exactly as planned. Setbacks are inevitable, and at times, we all get stuck in a place of fear, self-doubt and regret. It may just seem easier to accept defeat and retreat into a space that feels safe and secure … but Brené’s message is one of hope, of perseverance and strength.

It is in the acceptance of our vulnerability that we recognize that we are not powerless. In the space of vulnerability, we Brené Brown quote – Rise up with renewed power and strength to rewrite your future have time to accept our setbacks, time to reflect on our experiences, embrace them and practice the art of gratitude for the opportunity to learn from them. This gives us the power to rise up with renewed hope and strength to rewrite our future.

This was so true for me when I entered the financial planning industry. I have always believed that you cannot separate people from money and that a financial plan should support a person’s unique and personal life plan. With this perspective, I brought a new conversation to the traditional financial planning industry which predominantly only focused on investment returns. I knew intuitively that conversations about the client, the life the client wants to live and what their relationship with money is, were equally important.

When swimming upstream, remember your purpose

Re-thinking and challenging the way that financial planning has been done for decades, brought its fair share of criticism. I was constantly questioned by planners in the industry who referred to life planning as the “softer” issues and felt that these did not belong in the world of finances and investment strategies. I had moments of self-doubt and uncertainty and had to remind myself every day to persevere, to stay true to my beliefs and to keep on swimming – even though I was swimming upstream!

What made my journey worth it, and motivated me to keep on following my purpose, were the clients. Every time I had a courageous conversation with a client and saw how they embraced the fact that money can indeed enable a life of meaning, I felt inspired. And watching how clients design their RetiremeantTM as a fulfilling and meaningful next chapter, encourages me to keep rising strong.

I came to coin the concept, RetiremeantTM and define it as having the freedom to achieve your yet unfulfilled dreams and goals, on your terms and in your own time. Despite the challenges along the way, I am truly grateful that in my small way, I have made an impact on people’s lives. I am constantly moved by the stories clients share in Life Planning meetings and have come to realise that our combined knowledge and experiences are powerful stories and lessons that need to be told. This inspired me to start writing a second book, with our relationship with money as its central theme. I am also busy writing a series of e-books, a compilation of stories and lessons that our clients share around unexpected life events in – the RetiremeantTM What If’s.

We find strength together

This newsletter contains snippets of client stories and learnings shared in their journeys to rising strong – more of those in my upcoming e-books! Kate Turkington recently visited us at a Chartered Wealth Solutions and gave an insightful talk on her life in Retiremeant™. For me personally, Kate is a role-model on living Retiremeant™ to the fullest and I hope that you find appreciation and inspiration in her story. If you do have any spare time this weekend, I recommend that you see Brené Brown quote – we don’t have to do all of it alone.“Finding your Feet” which is showing in cinemas now.

By sharing these stories, my wish is that you find comfort in the fact that you are not alone. Just maybe, one of these stories will touch you in some way, inspire you to live a brave life, through all your stumbles and falls, and give you the strength to rise bravely and strong.

We teach what we learn – unintentionally

We have a wonderful opportunity to teach our children responsible and healthy money lessons.

Imagine the possibilities for your children if they grow up with a healthy relationship with money – one where they don’t measure their self-worth by how much money they have … or don’t have. Over the years, many clients have expressed to me their various regrets and happiness around unhealthy and healthy money lessons they had learnt from their parents, and in turn, taught their children.

Some are proud of, and others regret the money messages shared.

As parents, it is our duty to teach our children right from wrong, but at the same time, be aware of not teaching them to be just like us. I am sure many parents have deliberated on messages and behaviours they would like to pass on to their children. And I guarantee you that no parent wants consciously to teach their children bad behaviour and unhealthy habits. or to pass on low self-esteem.

If you had to ask most parents what their number one wish for their children is, the answer will most probably be “happiness.” So how do we teach our children and perhaps grandchildren about money to inspire happy lives?

You can teach your children unintentionally or intentionally. Most communication to our children is probably unintentional. Children learn from what they hear, see and experience while growing up, and if your relationship with money is based on fear, loss and anxiety, then this is the message that you are unintentionally passing on. And in all probability, these were the messages passed on to you by your parents.

Would it surprise you to hear that recent research tells us that children’s money habits are formed by age seven? And that, as adults, we operate on a subconscious level 95% of the time? This means that our conscious mind is really only working 5% of the time while our subconscious mind runs the show most of the time!

Intentional teaching is sharing thoughtful money messages. We as parents can only teach thoughtful messages if we are aware of our own money story, understand our relationship with money and have the wisdom to change the behaviours that don’t serve us, and keep the ones that enable our lives in a positive way.

Real-life examples

I recently participated in a Life Planning meeting with a father and son. The father reflected on the The first step in teaching your kids how to handle money is to be a good example.money messages he heard while growing up. His father taught him to work hard for his money, and with hard work, comes reward. You may consider this to be a positive money message, but reflect for a moment if the message would have been more powerful if it had been about “earning money by adding value”? This father, now 70 years old, is still working hard for his money. He fears that if he is not working hard, he is not adding value and therefore not deserving of earning.

The father unintentionally passed this same message on to his son. He also works incredibly hard but expresses the wish to be able work “cleverly,” so that he can shape a more balanced life for himself. Father and son wholeheartedly agreed that this is a cycle they would like to break. They don’t mind working hard, but recognise the need for balance: more time to laugh, relax and just living the life they were meant to live. I am sure that the constraining message will not be passed on to future generations in this family.

Ingrid is a client who reflects on a very positive and empowering money story passed on to her by her father. Her father empowered his girls to be independent; he supported and sponsored their tertiary education at a time when most women were not encouraged to study. He instilled a belief in them that anything is possible. This belief Ingrid’s father had in her capability and ability to succeed served her well. Because of this, Ingrid has had the courage and determination to follow her true purpose in life – and make a success of it!

It astonishes me how powerful father and son relationships can be. In honour of Father’s Day this month, I would like to share one more father and son story that has inspired me as a mother of two boys. The son shared with me that his father always asked, “How much pocket money do you feel you deserve for the time it took to do your chores?” This money message has had a wonderful positive impact on the son’s life.

Today, he sees earning money as an exchange for time. His most precious commodity in life is “time”. He will therefore always compare the value of his time versus the money that he is earning for his time. He is now planning to retire early from his formal career and re-invent his work so that he and his wife have more time to explore some of their unfulfilled dreams.

My parting thought on learning and teaching is a money message about saving and investing – the value of compound interest. This could be a fun activity to do with your grandchildren. My advice is not to just establish a savings or investment account for them, but rather to involve them in the process, engage with them on how it works – in this way you are helping them to take ownership from a young age.

Wishing you many happy – and intentional – courageous currency conversations in your family!

When the markets cause concern, consider context

When the markets cause concern, consider context

What is your burning question? If you were seated, face-to-face with your financial planner right now, what would be that top-of-mind concern that you would raise?

I got a sense of the answer at the most recent Retiremeant™ workshop, our third in Johannesburg, when I asked the audience, comprising clients and their guests, “What would you most like me to share with in the time we have together?” The unanimous response was: the flat market conditions.

It is the same question that has been emerging in our client review meetings, where the reporting cycle preceding it has reflected flat returns.

I thought, in light of this understandable sense of disquiet, that I might share some points to lend perspective.

The relevant reporting period
The reporting period is the period over which you measure your returns. For most people, it is the day on which you invest your money until the end of the most recent month.

I found the following stats quite interesting:

* If we go back three years from December 2017, we see that the JSE yielded an 18.5% return

* Three years from 31 march 2018, and the JSE only gave you a 6% return (this is why the last quarterlies statements looked so poor)

* Go back three years from the 31 May 2018, and we have a return of 10%.

So as you can see there is quite a difference in returns across these three periods which are within six months of each other.

The same applies to the currency, US$ to the rand. Looking at the three periods in rands, you either gained 7%, lost 2% or gained 4.3%. This variance can be quite significant. This is why the recommended term for investing in equities is seven years plus: over the short to medium term, returns are highly volatile. We are gratified by the fact that we have had no negative years since 2008, the longest period in history without any negative years. If we look at the five-year and seven-year performance, we are comfortable. It’s through these inconsistent returns that we must sit tight.

A local and global trend

Blaming the asset manager might be a valid response, were the markets going up and your investments were not. In reality, it’s the investment markets as a whole that have really struggled this year, both locally and globally, so it’s not fair to blame the asset manager.

Our JSE is down 6% this year and most of the global indicies are in the same space. Both PMX and OM Multi managers are doing the best they can, ensuring you have a well-balanced portfolio spread across various asset classes, and also across a number of world-leading asset managers.

We will share updates with you in your review meeting: information relating to market performance; we aim to give you a greater understanding of the current investment climate. It’s useful to remind ourselves that last year was probably the toughest year for South Africa in the post apartheid era: sentiment was at an all-time low, yet our JSE still delivered a 21% return.

Change in Chartered’s reporting to clients

At Chartered, we have been working on creating a reporting communique that is comprehensive and easy-to-read. We are happy to announce that, from the beginning of July, you, our clients, will no longer receive the communique entitled Interest. Rather, you will receive Navigating the Tides which is your new weekly economic market update. If you have unsubscribed before, you will find we have re-subscribed you, giving you the option to consider this new format. If you don’t receive it, please check your junk mail or spam folder – your server may be filtering it out.

As always, Chartered Wealth Solutions is hard at work to continue improving on the service we offer our clients, and to keep our relationship based on trust and reliability. I appreciate discussions with our clients, be it face-to-face at events or via email, so feel free to continue to communicate with me.

Warm regards

The cure lies in the cause

Wellness is not a point in time, but a continuous cycle. It is a continuum of cause and effect.

Stress, anxiety and trauma are the most common reasons why people are unwell today.

It’s not the actual trauma or stress that causes your un-wellness, but how you respond or react to these events, the emotions that flow from your experiences, that impact on your well-being.

These are the health lessons presented by Dr Riaz Motara at a recent Lifestyle event for our Retiremeant™ clients.  To say I was inspired by Dr. Motara’s views on wellness is an understatement. I was so enthused that I immediately set up a follow-up appointment: I wanted to learn more!

Dr. Motara’s view on the correlation between health and our thoughts substantiates our Retire Successful philosophy that a healthy mind supports a healthy life. It’s about keeping your body fit, your mind challenged and your heart engaged.

Don’t discount the impact of your emotions
Dr Motara joins many other experts in the field of holistic health when he says that “fear” is the most significant emotion that underpins everything that happens to us as humans. It affects how we approach life, the decisions and choices we make, how we act or react – in fact, fear subconsciously steers almost everything we do.The difficult part is that our emotions are not really a conscious choice to make. We feel, because we react to something in a certain way.

While fear is the core emotion, how we negatively react or feel, based on trauma, are derivatives of fear: hate, anger, disappointment, discontentment, abandonment, loss, insignificance – and the list goes on.

It all sounds so complex, doesn’t it? To explain, I shared with Dr. Motara that the therapist I was seeing after my third high-jacking told me that I brought all this onto myself. That made me angry! No – fuming! Then Dr. Motara explanation made sense: my negative emotions became my self-talk and all my efforts to heal after the trauma were based on overcoming my fear. I was so fixated with fear that I ended up attracting fear into my life. The stress and anxiety actually caused me to become unwell in body and mind.

It’s a matter of the heart
The same applies to your health. Being a cardiologist, Dr. Motara dedicates much thought and research to issues of the heart. He has actually found a strong correlation between depression and heart disease. He says that by treating patients holistically, and by delving into past experiences, he is able to determine when the heart disease started. For example, a client with heart disease also tested for low levels of serotonin. Motara discovered that the feeling of “un-wellness” and heart disease started hand-in hand, shortly after a traumatic life experience.

Motara believes that 50% of the cure of any illness is having insight into what caused it. Ask yourself:

  • When did it start? When can I last remember feeling great?
  • What did I get exposed to?
  • Does this correlate with how I am feeling now?

The answers are inside of us. Unfortunately, it is not always easy to access traumatic memories, but if you delve deep enough, and try to make sense of your behavioural patterns, you could probably pinpoint your health to a specific cause and reaction.

The cornerstone of complete wellness remains a holistic approach. It is essential to consult a medical practitioner to treat your symptoms, but it is also important to work on managing your emotions and dealing with all the challenges that life holds, which most commonly includes stress and anxiety.

 

So, this winter, while it’s cold and gloomy and early morning walks are not as appealing as in summer, why not spend some time exercising your mind towards wellness. I’ll join you in that!

Keep warm and well.

Follow your flow

If you love what you do, it’s play, not work

Ever been so involved in a specific task or project that all else falls away? So immersed in what you are doing that nothing else seems to matter? And the best part – when you finally emerge from your complete absorption, you feel happy … even elated! And you can honestly say that this was the best day of your life. Now imagine feeling like this all the time – this is following your flow.

So, no, time does not pass faster because you are getting older; it flies swiftly when you are engaged with something that resonates with your true and deepest passion. Research by McKinsey spanning a decade shows that people ‘in flow’ are 500% more productive and learn between 200% and 500% faster.

I have spent much time reflecting on what brings meaning to my life. I have realised that it is the people in my life – my family, friends, colleagues and clients – that fill my life with purpose, learning and wisdom. The essence of who I am, what makes my life a meaningful adventure, rests in the sharing of what I have learned … and this is what my career has grown out of. This is what it means to work in the flow.

Flow flavours life with purpose

The benefits of working in our flow is both tangible and intangible. For me, a very important one is Gratitude. It’s that feeling of happiness that blossoms from appreciation. And the emotions of thankfulness just keep on flowing. I am especially grateful for being able to do the work that I love and for the wonderful clients that share in my journey.

A tangible benefit expresses itself in the writing of my second book – and, for good measure, a whole series of e-books about our relationship with money, all with the aim of enabling a successful RetiremeantTM. This journey allows me to spend time interviewing clients in order to share their insights and wisdom on money stories and work re-invention. I am convinced that the success of my first book was partly because of the client stories. It is clear that people learn more from stories than theory. And stories are so powerful!

I am so grateful for the stories that our clients share. Not only do these stories inspire me in my work and in writing my book, but the stories also inspire others in their RetiremeantTM journeys – they are encouraging and support people on so many levels.

Lynda’s story

I recently interviewed our client, Lynda Smith, Founder of Refirement Network and 50-Plus Skills. You can read about her and her venture in this newsletter. With this business initiative, Lynda is certainly working in flow. “If you love the work you do, it’s not work, it’s play,” she says.

Lynda is a prime example of merging her Passion with her Purpose to earn a Play-cheque. But her journey did not just happen. It took nine long years of thinking, planning, dreaming, and visualising her flow to get to where she is today. During those years, Lynda continued working for a salary to pay off debt and to invest towards her retirement fund.

Finding your flow often means a parallel process: the work that you are doing at the moment to service your financial responsibilities and the work you plan to do – work that you are passionate about, work that inspires you.

What I know for sure is that investing time to think about your flow, and, secondly, working in flow, can be so rewarding that it is absolutely worth the extra input of time and energy to reinvent your work-self in RetiremeantTM.

Imagine the possibility of waking up every day and doing the work that speaks to your purpose – your flow. What a glorious sunrise that would be!

Access the April issue of Inflight here

Something that makes you lose track of time

My 50th birthday certainly marked a milestone in my life! And yes, I am still celebrating and excited about the adventures that lie ahead in fulfilling my passions.

I don’t think it has anything to with aging, but I am constantly reminded these days that time indeed flies when you are having fun. Have you ever been so involved in a specific task or project that all else falls away? So immerged in what you are doing that nothing else seems to matter? And the best part – when you finally emerge from your complete absorption, you feel happy! Even elated! And you can honestly say that this was the best day of your life! Now imagine feeling like this all the time.

So no, time does not fly because you are getting older, time flies swiftly when you are active on something that resonates with your true and deepest passion. And the added bonus – a research project by McKinsey and Co. spanning over a period of 10 years has shown that people in flow are 500% more productive and learn between 200 and 500 percent faster.

So yes, although I experience time flying at an immense speed every day, I am thankfully not getting older any faster. I have spent many hours reflecting on what brings meaning to my life, and have realised that it is the people in my life, my family, friends, colleagues and clients, that fill my life with meaning, learning and wisdom. My true happiness, my flow, does not only rest in the learning, but in the sharing. The essence of who I am, what makes my life a meaningful adventure, are these two things: learning and sharing. This is what it means to work in flow.

The benefits of working in flow just keeps adding up. I want to mention one more: Gratitude. That feeling of happiness that flows from appreciation. And the emotions of gratefulness just keep on flowing. I am grateful for being able to do the work that I love and for the wonderful clients that share in my journey.

I am busy writing my second book – and, for good measure, a whole series of e-books around our relationship with money matters to enable a successful Retiremeant™. This journey allows me to spend  a lot of time interviewing clients so that I can share their insights and wisdom on money stories and work re-invention. I am convinced that the success of my first book was partly because of the client stories. People just seem to learn from stories, rather than theory. And stories are so powerful!

I am so grateful for the stories that our clients are sharing. Not only do these stories inspire me in my work and writing my book, but the stories inspire others in their Retiremeant™ journeys, it encourages and supports people on so many levels.

I recently interviewed a client, Lynda Smith, Founder of the Refirement Network and 50+ Skills. Lynda’s vision is to influence 10% retirees to work for 5 years longer by applying their passions and skills to make a difference. With this business venture, Lynda is certainly working in flow. “If you love the work you do, it is not work, it’s play”, says Lynda. Lynda is a prime example of merging her Passion with her Purpose to earn a Play-cheque. But Lynda’s journey did not just happen. It took nine long years of thinking, planning, dreaming and visualising her flow to get to where she is today. During those years, Lynda continued working for a salary to pay off debt and invest towards her retirement fund.

Finding your flow often means a parallel process with the work that you are doing at the moment to service your financial responsibilities, with the work that you plan to do – work that you are passionate about, work that inspires you.

What I can say for sure, is that investing time to think about your flow, and secondly, working in flow, can be so rewarding that it is absolutely worth the extra input of time and energy to re-invent your work-self in Retiremeant™.

Imagine the possibility of waking up every day and doing the work that speaks to your purpose – your flow. What a glorious sunrise that would be!

The persistent popularity of property

Chartered Wealth Solutions’ RetiremeantTM Specialist and Certified Financial Planner®, James Carvalho, assesses the value of rental property as an investment.

Over the past ten years or so, I have been party to numerous conversations that have debated the merits of rental property. I have frequently wondered what lies at the heart of this affiliation to property.

I have concluded that it is most likely the ability to own something tangible – you can see and touch it. (You seldom hear braai-side talk of share portfolios or unit trust portfolios!)

While property is certainly a viable option for investing, what many may not realise (if unprepared for the rigors of renting out property) is that this investment can be a source of persistent headaches.

The case for diversity

In 2011, in the wake of the 2008 global financial crisis, one of my clients was overwhelmed by her emotion in our meeting. She owned eight properties and suddenly, four of them were standing open. Three of the tenants had lost their jobs and one of them had moved to Cape Town.

Rental payments from her remaining tenants were barely covering her bond costs, and she still had three bonds over the properties.

For years, I had been encouraging her to diversify her risk in her investments. But, as so often happens, she was lured by the exaggerated returns in the property market, based on the promise of the boom years from 2002 to 2008. And the unfortunate consequence has been that, at present, she has managed to sell only two of the properties, and her rental incomes are not beating inflation, and nor is the annual growth on her property.

Still a sound investment?

Through a planning process, we as financial planners would establish what the optimum investment return would be for your money to sustain your lifestyle and to last the term of your retirement.

Generally, we find retired people aim at achieving a return of approximately inflation plus 4% with their funds.

In light of this goal, I note some of my clients’ responses, when I ask by how much their rental fees had increased. “Nothing this year; it’s been a tough year for my tenant,” or, “My tenant just lost his job so I am giving him a contribution holiday.”

Perhaps the most concerning comment was that the tenant would not pay and possession equals nine tenths of the law.

Despite these tales of rental regret, there are still many investors whose investment in property has given a positive return.

I would suggest that, if you are thinking of buying property to rent out, you consider the following:

  • Buying off-plan is appealing as there are no transfer duties. Transfer duties is a sunk cost: it is doubtful that you will recover this cost.
  • Schedule fixed rent increases in your lease – it obviates having to negotiate these every year. Rent should increase by more than inflation every year.
  • Establish a lease of twelve months, renewable with three months’ notice, thereby allowing you time to find a new tenant.
  • If you are a tax-payer, bond your rental property so that you can write off the interest against the rent.
  • Rental income is taxable and needs to be added to your tax return.
  • When you sell a property, other than your primary residence, it will attract Capital Gains Tax.
  • You need to be able to pay for repairs to the property; as a rule of thumb, you should keep 10% of the rent aside for maintenance.
  • If you don’t have the patience to deal with tenants, use an agent to rent out the property. This usually comes at a cost of 10% of the rent, but it is often money well spent.

In conclusion, I reiterate the timeless sound advice to ensure you diversify between all assets when investing: shares, cash, property stock, and corporate and government bonds.

And, remember, that your financial planner is always at hand to guide and advise you.

Small change for big change

I recently met with a client who retires in 13 months’ time. If you’ve read anything I’ve written, you’ll know I distinguish between the concepts of “retiring from” and “retiring to”. So, true to form, the discussion came up: “What is it that you are retiring to?” I asked.

My client is excited. He has an idea for a consulting business that will see him using what he’s learnt over the last 20 years, offering his skills and services to the private sector. It’s something inspiring for him to retire “to”. But it won’t be on a full-time basis – and it won’t give him the equivalent of his current income. This means that he’ll need to start drawing an income from his investments.

It’s about more than the money

This is the where the real acceptance needs to kick in. In my experience, there’s an emotional adjustment that has to be made. This sounds simple enough, right? Because we all know that the day finally does come. Isn’t that what we’ve been planning towards for the last 40 years?

Trust me when I say this: no matter how prepared you are, retirement still comes as a shock. Regardless of how much you save, you have to be up for the change. Or changes. There’s a mental adjustment: you’ve spent decades saving and now you need to start spending it.

Then there’s the emotional – and financial – reality around the probability of you never working again. And even if you do work, chances are you’ll earn far less in retirement than you did while formally employed.

Another emotional shift is our sense of worth and how we perceive the value we add to our families. If you’ve been the provider for many years, you might struggle with how you derive self-worth. If this is you, please be encouraged: you only have the money you have now because of your foresight and discipline. The value you add continues into the future because of this very fact.

But, the money is important

Another financial shift you’ll need to make? Realising that there is no point in drawing from your investments – only to put savings aside from that. It’s financially unwise, so just draw down less to start with.

My client admitted that some of these challenges are going to be real for him. He reminded me of his first money memory. It was something his dad taught him – that a fool and his money are soon parted – and it weighed heavily on him. What if he acted foolishly? Could he wisely manage drawing down from his investments?

This is why having an actual RetiremeantTM plan – and not just a string of investments – is essential. You need to know that you have enough so that the fear of running out doesn’t stop you from living.

But I promise you: this will not be enough to convince you – regardless of how disciplined about saving and investing you’ve been. You’ll still need to be open to change. But it takes time to accept a new reality, so be kind to yourself. It takes time to amend a mindset that has served you so well all these years. Remember, though, why you saved and invested in the first place – so that one day you could have the freedom to choose what you were going to do with your time, your money enabling that life. In the bigger scheme of life, your money is the “small change” that sets the tone for the big change – changes – you’ll need to embrace.

Change is hard. Not many people like change. But you are not alone as you face what’s ahead. If you don’t feel ready for the retirement road ahead, please book some time with me. Let’s talk small change – and big change – over a cappuccino.

Your quick guide to the toughest budget in years

We’re not even two months into the year and we’ve already seen some game-changing political events.

Our new President was sworn in on Thursday, 15 February – almost 18 months sooner than expected – and we wish Mr. Cyril Ramaphosa every success in returning South Africa to an all-important economic growth path. A growing economy makes our lives that much easier in that it improves the outlook for investment returns and reduces the pressure on government to raise income tax. And that brings me to the topic of today’s communication: the 2018 Budget Speech.

There has been so much political noise over the past two months that we were left wondering whether the Budget Speech would even take place today – and as recently as yesterday we weren’t even sure whether the current Minister of Finance, Mr. Malusi Gigaba, would take to the podium. But sanity prevailed, and the speech went ahead at 2pm as planned.

Budget day is an important ‘marker’ in the financial planning year. It is held near the tax year-end of 28 February and is a great time for you to focus on getting your tax planning right and to take advantage of any ‘tools’ to save tax efficiently, in line with your Retiremeant™ plan, of course.

What did we expect from the Budget?

Most analysts quoted in the media in the past two weeks predicted a tight budget. You need only look at some of the key issues to appreciate National Treasury’s problem … They are struggling with slow economic growth; a R50.8bn shortfall in revenue collection for the current tax year; and rising expenses due to the funding demands of free education and National Health Insurance. These projects are consistent with Government’s focus on socioeconomic transformation as they strive to overcome the inequalities and divisions so apparent in our society.

What did the Budget Speech reveal?

At the outset I should say that the 2018 Budget Speech is one of the toughest that we’ve seen in many years, but this wasn’t unexpected. Chartered Wealth Solutions predicted that the 2018 Budget would be extremely tough on High Net Worth (HNW) clients, difficult for the middle class and largely neutral for the rest. And we had it spot on!

Our expectations were confirmed early in the speech. An additional R36 billion is being raised through a combination of tax increase, mainly through a higher VAT rate and below-inflation adjustments to personal income tax brackets. We summarise the main tax proposals as follows:

  • An increase in VAT from 14% to 15%;
  • A below inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets;
  • An increase in the ad-valorem (proportional) excise duty rate on luxury goods from 7% to 9%;
  • Estate Duty will be levied on the dutiable value of an estate at a rate of 20% on the first R30 million, and at a rate of 25% on the value above R30 million;
  • A 52c per litre increase in the levies on fuel (22c for the general fuel levy and 30c for the Road Accident Fund); and
  • Increases in the alcohol and tobacco excise duties of between 6% and 10%.

There were no changes to the marginal rates of individual income tax, the rate of tax on trusts (45%) or the rate of tax on companies (28%). Transfer duties on the sale of properties remained unchanged too, with a 13% tax on the portion of the transaction exceeding R10 million.

The feared removal of medical-schemes tax credits did not materialise either; but the increases were minimal – from R303.00 to R310.00 for the main member and first dependent, and from R204.00 to R209.00 for each additional beneficiary. Other good news is that there were no changes to the tax treatment of retirement fund lump sum benefits or severance benefits.

What does it mean for you, near retirement or in retirement?

We were a bit disappointed on two fronts: firstly, the R500,000 tax-free portion of the retirement lump-sum benefit was not increased; and, secondly, there was no increase in the maximum contribution in either Retirement Annuities or Tax-Free Savings, being 27.5% of Retirement Annuities contributions capped to R350,000 and R33,000 for Tax-Free Savings contributions per annum respectively.

The changes in Estate Duty apply to estates worth more than R30 million and will affect High Net Worth individuals who will have to review their financial plans and estate plans accordingly. We note that the basic deduction allowed under this tax heading was left unchanged, at R3.5 million. We will be communicating more on this in due course.

What happens next …

You should not make hasty financial decisions based on the changes announced in today’s Budget Speech. Your best approach is to stick to your RetiremeantTM plan and make considered changes to your portfolio over time based on the advice of your Retiremeant™ Specialist, thus continuing your journey towards a secure RetiremeantTM based on your lifetime goals and dreams.

We invite you to contact us if you have any concerns about the Budget Speech and what the various changes to taxation rates mean to you.

Warm regards
John Campbell

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