Our clients have shared their concerns about retirement with us over the years that we have met with them – we understand that this is a stressful time that can make people feel vulnerable and confused. We are sharing these answers to the most commonly asked questions, with the aim of preparing you for this transition.
We want to help our clients look forward to retirement, rather than dreading it.
- The current size of your “retirement pot”, which includes all the savings and investments you have earmarked to fund your retirement;
- The income you would like to receive on a monthly basis, as well as any lump-sum drawings you would like to make for special events (children’s weddings, overseas holidays) or to fund the items on your “bucket list” (list of things you would like to do before you die); and
- A rate of investment return or growth that you would realistically like to be added to your retirement pot over time.
Once you provide us with this information, we input it into a financial planning tool that calculates the age at which your money is likely to run out.
Let’s assume that Bronwyn is retiring at 65 and provides us with the following information:
- She has R5 million cash in the bank which, we will assume for the purpose of this example, is her entire retirement pot;
- She tells us she needs an income of R20,000 per month and R50,000 per annum to cover her bucket list (these are after-tax amounts and must also increase by the rate of inflation every year); and
- She is happy to use a fairly conservative, average investment return that beats inflation by 2% per annum.
Based on this information, our financial planning tool estimates that Bronwyn’s retirement pot is most likely to become empty when she is 91 years old. Please remember that the greater your return on investment, the longer your money will last. So in this example, if Bronwyn were happy to target an average return that beat inflation by 4% per annum (which is a less conservative target) we estimate that her money will run out at the age of 111.
A word of caution, however … Everything comes at a price. The greater the return on investment you choose, the greater the investment risk to which you are exposed. This means you will experience increased daily positive and negative fluctuations in the value of your retirement pot. When deciding on a realistic rate of investment return, therefore, it is essential that you understand, and are able to endure, whatever level of risk you choose. View the video below which explains how we would go about determining your graph.
To find out what your graph looks like, click here to contact us.
It’s therefore important for you both to plan for inflationary increases and aim for the peace of mind that comes from knowing that your money will last the course of your retirement.
Although it would be best for you to determine your own particular financial needs during your retirement – based on your personal circumstances – here is an example that might be of some help to you.
Mr Carley has R3 million in the bank to fund his retirement. He would like an income of R15,000 per month, which will increase at the rate of inflation every year, and he would like to know how long his money is likely to last.
Below is a summary of the financial calculations we did for him. Notice how the return assumed changes the age at which his money runs out!
While this is clearly a basic example, when determining whether your income will keep up with inflation, you would need to consider other factors that will have a bearing on the calculations that are done for you. These include the source of the money you invest, your personal tax situation and any lump-sums you would like to draw from your funds. Also, bear in mind that the return you may choose to target will fluctuate over time, so the age predicted in the last column should be seen only as a guideline to help you choose a suitable investment return to target.
Find out if your investment will keep up with inflation, click here to contact us.
The good news is that, if you first plan your lifestyle (how you want to live and what you want to do during your retirement), you will have a better idea of what you want from your money.
It’s then relatively easy to determine a suitable investment strategy. This is the key to determining where and how your money should be invested.
Let’s assume you want to invest your retirement money. You will probably agree that living the high life (rather than a quieter and more conservative lifestyle) will place a greater demand on the investment returns you will need. To be clear about how to invest your money, you have totarget a return that will generate sufficient funds to support your desired lifestyle! This is the difference between investing and speculating.
So, once you have established your investment goal (the return you need to fund your lifestyle), you have to decide where best to invest your money to secure the necessary returns. You then need to build an investment portfolio specifically designed to achieve those returns. We help by building a different investment portfolio for every client that achieves their specific targets and, in so doing, meets their particular needs.
Each investor’s portfolio is made up of different ingredients – known as “asset classes” – such as cash, shares and property, both locally and offshore, and each ingredient has, over time, a different likely return and a different amount by which that return is likely to fluctuate.
By carefully blending the ingredients together in certain proportions, we are able to target the return you need at the lowest possible level of risk (so minimising fluctuation or volatility). The final step involved in investing your money wisely is to understand and accept the risk you have to take to achieve the return you need to live the lifestyle you want. Once you accept that risk, there are no unpleasant surprises.
Find out what your targeted return should be, click here to contact us.
In most clients’ cases, we manage a flow of income to them, both on a monthly basis to fund their daily lifestyles and on a “lump sums” basis (for holidays and other “bucket list” items). The flow of income, mentioned above, invariably comes from two investments that we set up for our clients when they retire. These are:
- a pension, called a Living Annuity; and
- a Tailored Portfolio (which is similar to a unit trust which is tailor-made for each client).
The following table identifies some assets you might have before retirement and lists which retirement investment (Living Annuity or Tailored Portfolio) you may want to consider transferring some or all of them into upon retirement, depending on your personal circumstances:
If you have one or more of the investments marked with an asterix in the left hand column of the table above, you are most probably going to end up with both a Living Annuity and a Tailored Portfolio at retirement. Both have distinct advantages and disadvantages.
A tailored portfolio is completely flexible, allowing for any level of drawings (income) at any time (monthly or on an ad hoc basis) and these drawings are tax-free! A living annuity, however, provides an inflexible pension that can only be changed in size, by you, once a year. This income is taxable. That makes it a definite win for a Tailored Portfolio!
With a Living Annuity, you pay no tax on the interest or the capital gains earned and it is exempt from estate duty! A Tailored Portfolio, however, accrues taxable interest and capital gains for you and is estate dutiable. In this case the Living Annuity wins! By carefully managing the drawings or income from these two investments, we are able to help you secure exactly the income and lump-sums you need in the most tax (and estate) efficient way possible. Finally, we also need to take into consideration any other sources of income (and lump-sums) that you might receive during your retirement. Examples of other income would be property rentals, income from work done beyond normal retirement age and/or dividends.
Find out more about how this applies to you click here to contact us.
Let’s look at these challenges in more detail:
A retirement plan requires precise calculations to ensure the correct set-up of your retirement investments. This involves careful work around investment portfolio design, likely returns and investment risk. It requires sound investment structures to safeguard your life savings in addition to getting your tax planning and estate planning right.
Statistics show that the average retiree takes a couple of years to adjust to retired life. This time of adjustment can be a stressful and confusing time. As a retirement specialist company that understands this key period of life, Chartered Wealth Solutions can help you to ensure a seamless and comfortable transition into retirement. We have the necessary resources to address the emotional challenges through a process of visioning and life planning that assists retirees to maintain a sense of purpose and balance as they enter this new chapter in their lives.
When it comes to merging the technical and emotional challenges simultaneously, experience has taught us that many financial objectives critical to the technical process are only uncovered in the visioning and life planning process. This process therefore has a positive impact from both an emotional and a financial point of view.
So what options do you have when planning your retirement?
- use a broker, investment advisor or financial planner; or
- use a retirement specialist (such as Chartered Wealth Solutions).
Consider the many services in life that require specialist knowledge and expertise, such as those in the medical profession. You would never consider asking an unqualified person to perform a medical procedure on you. That’s because you know your wellbeing and survival may be at risk! In the same way, you should never consider allowing an unqualified person to help you plan your retirement. It’s just too important to your financial wellbeing!
Don’t leave your future happiness in the hands of unqualified people. You need the best people looking after your retirement plan so you can confidently pursue your retirement goals, knowing that your financial matters are in the hands of experts.
You still have a lot of living to do and many transitions to navigate, some expected and some not. Markets will fluctuate and tax laws will change, so you will need to review your retirement goals.
For a complimentary consultation click here to contact us.
At Chartered Wealth Solutions we believe that retirement is a journey and not the final destination. Cultivating this kind of attitude is the first step toward achieving a successful retirement.
Adopting this approach is the first step toward achieving a successful retirement.
Retirement will account for a third of your life, but most people stumble into it without a plan. Creating a vision of what you want the rest of your life to look like is vital when mapping out your retirement plan.
Traditionally people retired from something, but at Chartered Wealth Solutions we place the emphasis on what you are retiring to. You may even choose never fully to retire, but it is important that if you do, you retire on purpose with purpose. George Eliot said, “It’s never too late to be what you might have been,” and retirement offers you a unique opportunity to redesign your life.
Balance is essential to a successful retirement. Click here to take our Balance Test and assess how balanced your retirement currently is.
Life is simply too short to settle for a lukewarm existence and that is why Chartered Wealth Solutions has created the Retire Successfully website. The website was designed for people close to or in retirement. Click here to discover more on what Retire Successfully has to offer you by keeping you young in mind, body and spirit with vitality and vigour!
May our Retire Successfully help you to retire successfully.
Our approach is different from conventional financial planners because, for us, holistic retirement planning is the only way to create a successful plan of action – a plan that integrates your personal aspirations with your financial resources. With our extensive experience in the retirement planning field, we have come to understand that, in the wheel of life, money is merely one of many spokes.
And while your financial preparation is very important, we encourage you to give careful thought to what kind of life you would like to live in retirement. Our unique process therefore involves a separate Life Planning meeting to help you envision your life during retirement so that we can help you plan your finances to make that life a reality.
We ask our clients challenging questions such as:
- What kind of life would you like to live during your retirement?
- What changes do you anticipate along the way?
- How will you get the most out of each and every day?
- What things will you miss most about your time at work and how do you plan to replace them during retirement?
At Chartered Wealth Solutions we have found that Balance is essential to a successful retirement.
Click here to take our Balance Test and assess how balanced your retirement currently is.
We invite you to make use of the services and facilities we offer to ensure that you can retire successfully. It is our desire to help you live every day with purpose and meaning, believing that the best is yet to come!
To see us for a complimentary consultation click here.
- Chartered Wealth Solutions is the only financial planning business in South Africa specialising in helping people retire successfully.
- Chartered Wealth Solutions has the latest tools available globally to plan for both your money and your life in retirement.
- Chartered Wealth Solutions is an award-winning company, having won the Financial Planner of the Year Award in 2008 and the Celestis Best Practice of the Year Award in 2009 (read more about our industry awards).
- Chartered Wealth Solutions has the only two internationally qualified Registered Life Planners in South Africa.
- Chartered Wealth Solutions is a co-founder of the Financial Life Planning Institute of South Africa™.
- Chartered Wealth Solutions is the most forward-thinking and pioneering company in its field, having created retiresuccessfully.co.za, a website devoted to helping its clients and the South African community – well – retire successfully!
But apart from our awards, achievements and innovation, we work hard to give our clients the security of knowing that we live out our values. Our passion is to inspire you to live a well-balanced and fulfilled life by promoting your personal and financial longevity through dynamic retirement planning. We believe our services will do more than surprise you. They will change your life!
To see us for a complimentary consultation click here.