planning for a better retirement

Transcription

1 planning for a better retirement

2 retirement is the time when you finally get to do all the things you said you were going to do

3 page 01 making the most of your retirement Retirement is the time when you finally get to do all the things you said you were going to do, whether that s catching up on reading or travelling around the world. Surprisingly, after the first year of retirement, many people report that they come down to earth with a thud when they realise there are many more years ahead. For some people, this is not a problem. They ve got so much to see and do, they want all the time they can get. For some, however, retirement can be a time of emptiness and boredom. What s the difference between the two groups? People who do well in retirement have certain factors in common: they had a plan for when and how they were going to retire; they re financially independent; they re engaged in meaningful pursuits for more than five hours a week; they have someone they can rely on for emotional support; they try to keep in good health through exercise, diet and regular check ups; they planned how they would spend their retirement, and how they would fund it; and they received pre-retirement advice or education. Fortunately, some of the most important indicators of whether you re going to enjoy your retirement are the last two points on the list. acsis, together with your financial planner can help you in attaining these. planning your retirement Before you retire, spend some time thinking about yourself and what gives you pleasure in life. Consider: with whom will you be spending most of your time in retirement? do any of your relationships need to be improved? what are the things you really enjoy doing? are you prepared to take on any part-time work to supplement your income? is there anything you ve always wanted to achieve but haven t had time? how is your health? what steps can you take to improve it? where are you going to live? working out your finances No matter what s on your retirement activity list, you re going to need a reasonable level of income to support your interests. That may seem as though it s easier said than done. Well, that s why acsis, together with your financial planner, is there to help you with the basics of investing and looking after your money, and also to look at the financial steps you need to take at different stages of retirement. There is so much complex legislation surrounding investment, retirement and income tax that you need your financial planner to help untangle it. It s also a good idea to make sure your financial goals are in line with your personal goals, and that your estate planning is up to date. If you don t have a financial planner, choosing one may well be the most important step you take along the road to retirement. acsis works through accredited independent financial planners and can help you with this important choice.

4 page 02 making the most of your money the fundamentals of investing There are two main reasons to invest money. One is to earn income, such as interest or dividends, and the other is to achieve growth on the capital, in other words, increase its value. Investing money wisely also means that you re protecting your money from the effects of taxation and inflation. All investments have some level of risk, and the level of risk you take generally dictates the level of return. Even bank accounts have risk (for example, there is a high risk they will erode your savings, after tax and inflation are taken into account). The key to successful investing is to accept that every investment has risk and then plan accordingly, with the aim of generating consistent and predictable returns. five strategies to help you manage risk 1. invest in quality Any investment that promises high returns is certain to have a high risk attached to it. These sorts of investments are speculative, and you run the risk of losing all the money you put into them; if you must invest in them, only do so with money you can afford to lose. The best bet is to put your money into quality investments. Quality investments also have their times when they go down in value, but the difference is that they recover, and usually more quickly and strongly than other investments. What to look for in an investment? a long track record of delivering growing returns to investors experienced, well respected management; and little or no internal debt. 2. use investments which protect you from inflation and tax The biggest threats to your investments are inflation and tax. The first eats away at the value of your capital; the second can consume a large portion of the income and realised capital gains generated by your investment. If you re a high taxpayer, this means that you can lose money on your investments. To protect against this, you need to invest in growth investments like certain types of shares and property. 3. invest for the long term The longer your investment time in quality assets, the higher your chances of generating strongly positive returns. Quality investments are also more likely to reward you with returns that match the level of risk you ve taken (risk being defined as the degree of fluctuating returns each year). Investing for the long term helps you to manage risk. Over the longer term, you can expect that investment classes will perform to expectations: in general, shares will outperform property, property will outperform bonds, and bonds will outperform cash. 4. diversify Not all investment classes (i.e. shares, property, bonds and cash) perform well at the same time. Some will perform strongly (they ll be bullish ), while some will slow down (they ll be bearish ). As a result, if you place all your money into one asset class, you can expect your returns to be volatile. That is, their value will fluctuate. One of the best ways to manage volatility is to diversify across investment classes. In other words, spread the risk. If you have all your money in one investment and it fails, you could lose your money. If you have your money spread across five investments classes and one fails, you could only lose up to 20% of your portfolio. 5. decide on an investment strategy and stick to it Once you implement your long-term investment strategy, monitor it on a regular basis. You ll find that you ll need to make adjustments to some of your investments as they begin to change. Unless there are very compelling reasons, however, it s not wise to change your overall investment strategy. Buying and selling in order to time the market is particularly dangerous.

5 page 03 pre-retirement preparation So you haven t retired yet, but you ve begun thinking about it. Whether you re in your 40s or 50s, you re at a stage where many people find their finances are in better shape than earlier in life. This is the time when mortgages get paid off and children leave home, and income is the best it s ever been. Now is the time to get serious about ensuring you have enough money for retirement, if you haven t already done so. how much money do you need to retire? Not surprisingly, the answer to this question depends very much on you, your budget and your lifestyle goals. If you plan to live quietly, the answer is not much. If you plan to go overseas every year, the answer is a lot! However, there is a very simple rule of thumb that can help you answer the question: First, pick the amount (in today s rands) that you want to live on each year in retirement. Then multiply that by a factor of 20. This will give you a rough guide as to how much money you need to have saved by retirement to achieve that annual income. financial planning People who plan fully for their retirement are not only better prepared financially, but feel more positive about taking this next life step. Your retirement fund is only the first financial step along the way to retirement; you also need to take into account investment and taxation. At this stage, work out what your retirement goals are, assemble your financial documents, and then head out to your financial planner. With sound advice behind you, you have a better chance of living your chosen lifestyle in retirement. checklist for pre-retirement preparations have you decided your retirement date? is your life insurance up to date? do you have a lifestyle plan? do you have a budget? do you have a financial plan? do you know how much money you need to fund your retirement? do you have an updated will?

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7 page 06 retirement preparations So you re on the threshold of retirement. At this point, it s important to work out how much money you ve got, how much you re going to receive, and how you re going to use it. Add this to the value of your assets, including your property, your investments and any money you have in the bank. This is the information your financial planner will need to know to help you with your retirement financial plan. checklist for retirement preparations meet with your financial planner change/update budget and or financial plan make decisions about what to do with the payments lump sum, pension make decisions about how much income you need check pension entitlements and other benefits ensure you have a will some more tips for looking after your money in retirement draw up a budget Budgeting is the number one way to reach financial goals, as it forces you to take a disciplined approach to spending and saving. Here are some handy tips for successful budgeting: Put some fun into it. Make sure your budget has room for entertainment and other fun expenses. If your budget is too rigid, you ll never stick to it. Be realistic. Don t try and lock yourself into budgeting for every grain of rice. Be flexible. If your circumstances change, re-do your budget. take out insurance There are two particular forms of insurance to think about: 1. life insurance. Will your retirement fund benefit and savings be enough to support your partner and dependants in case of your death? If not, think about life insurance. 2. income protection insurance. This form of insurance means you keep getting some income if you are sick or injured and can t work. plan your estate It is important to minimise the trauma of death for those you leave behind by leaving a valid will. A will is simple and cheap to prepare, and should: give instructions for the distribution of your assets after your death; provide instructions in the event that your beneficiaries die before you; make provision for everyone who is dependent on you; revoke any previous wills; and appoint an executor. If you die without a valid will (i.e. you die intestate), your estate goes to your next of kin. If your next of kin or other relatives can t be located, your entire estate will ultimately go to the Government. power of attorney Power of Attorney is the power you give someone to act on your behalf. While this is an enormous amount of power to give someone, you ll need it if you become incapacitated or ill. If you can t sign, your assets can t be accessed, even by you, if you don t have someone with a Power of Attorney. It is vital that you find someone that will act in the manner in which you would have, with your best interests at heart. It may be a good idea to seek advice with this important decision.

8 page 07 retirement If you ve already retired, then you ve already made your decisions regarding your retirement fund payout. Your focus now is on safeguarding your money against tax and inflation. It s as important that you get good financial advice as it is for someone approaching retirement, as you may have many investment and income options that you weren t aware of. You might find, for example, that you re paying more tax than you need to. At the very least, your financial planner will make sure you get everything you re entitled to! It s also more important than ever to plan your Estate, put a Power of Attorney into place, if required, and check the status of your insurance. Also, ensure all your important documents are together in a safe place and that someone knows where that safe place is. other retirement issues Of course, even if your finances are in great shape, they won t do you any good if you aren t enjoying life! take care of your health It s probably no surprise to learn that people who exercise regularly, maintain a healthy diet and have a medical check-up at least annually, are less likely to suffer from anxiety, stress and depression. keep your social life going We all need to be needed. In retirement, when the social networks that come with work have gone, it s more important than ever to build a support network for yourself. Keep in touch with friends, get out regularly, or find an organisation to join. As people age, it s easier to become isolated, which will make life very difficult if your partner becomes ill or even dies. Many retirees find that voluntary work provides not only pleasure and a sense of contribution, but also a social life. stay challenged Research has shown that those retirees involved in purposeful activities for at least five hours a week show less anxiety, stress and depression than those who are not. Purposeful activities are those activities where something is produced or achieved, whether this means getting involved in paid or voluntary work, arts or crafts or active membership of service organisations or clubs. checklist for retirees check your taxation, investments and entitlements with your financial planner make sure your will is up to date make decisions about life insurance and Power of Attorney have regular health checkups stay socially active it s important to work out how much money you ve got, how much you re going to receive, and how you re going to use it

9 page 08 who is acsis? acsis is an independent asset consulting and financial planning company. We develop and implement effective investment strategies for individuals, corporations, institutions, retirement funds and professional firms. acsis bases its success on a progressive approach to investment advice and financial planning. This approach is founded on the principles of lifestyle financial planning, pioneered by ipac. acsis owns the license to ipac in South Africa exclusively and in perpetuity. This strategic partnership with a global leader in the field of investment advice and financial planning provides acsis with a unique blend of local substance and strength with global resources. ipac, through its parent company AXA, is a truly global financial services group. AXA is one of the world s top three financial services companies and one of the world s top 40 companies when measured by annual revenue. AXA bought ipac to acquire the uniqueness and robustness of the ipac investment advisory process, which is regarded as a world leader. South Africa is the only country in the world where AXA does not own the license to ipac. However, thanks to the acsis ipac relationship, it ensures that the South African market also enjoys international best practice.

10 contact us Cape Town Physical Address: 6th Floor, The Terraces 25 Protea Road Claremont 7708 Telephone: Fax: +27 (21) (21) Web: Johannesburg Physical Address: Cullinan Place, Block A, 1st Floor, Left Wing 2 Cullinan Close Morningside 2196 Telephone: Fax: +27 (11) (11) acsis is registered as a financial services provider by the Registrar of Financial Services Providers Licence No. 588

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