Herewith short summary of changes impacting on Retirement Funding:
Contributions to retirement funds:
Contributions by employers to pension, provident and retirement annuity funds are not currently taxed in the hands of employees. From March1, 2012, these contributions will be deemed to be a taxable fringe benefit in the hands of the employee
Individuals will be allowed to deduct up to 22.5% of their taxable income for contributions to pension, provident and retirement annuity funds, subject to a maximum deduction of R200000 and a minimum of R12000. This is a slight change from the existing legislation where a distinction is drawn between retirement funding income and non-retirement funding income.
The taxation of employer contributions in the hands of employees will have a significant impact on the investment savings of retirement fund members. The tax deduction regime of 7.5% of approved remuneration for pension contributions and up to 15% of non-retirement funding income will no longer be applicable from 1 March 2012, and it is anticipated that the application of a total of 22.5% of taxable income (as opposed to approved remuneration or non-retirement funding income) for all retirement contributions means that the percentage deduction will be applicable off a smaller base).
The minimum deduction is potentially beneficial for low paid workers as this allows them to benefit from the floor level tax deduction. The R200000 cap on deductions makes sense from the government’s perspective as beyond a certain savings level it is clear that an individual will not be dependent on the state in old age.
Effective removal of provident funds
Withdrawal at retirement from provident funds will be limited to one third of the accumulated share of fund. On balance this is probably a good move as it will reduce the possibility of individuals squandering their retirement benefits. It appears that legacy provident funds will be accommodated, so members should not attempt to cash in their provident funds as their rights will be protected.
Taxation of lump sum benefits on retirement
Government will increase the tax-free lump sum on retirement from R300000 to R315000.
Showing posts with label Retirement. Show all posts
Showing posts with label Retirement. Show all posts
Thursday, February 24, 2011
Monday, August 16, 2010
Financial Planning for the Modern Woman
Michelle Human, Legal Marketing Specialist
Can the modern woman really have it all? Today, women have more oppertunities, choices and challenges than ever before. Women need to take control of their financial planning to make sure that they own their lives, especially in the event of a life- changing situation. Here are some things to consider when it comes to taking charge of your financial freedom.
Look after yourself first
A woman needs to have a financial plan that caters for her own needs.
If she has children or is thinking about starting a family, her retirement plan must take into account a possible break in employment, even if only for a short time, while she is on maternity leave.
If it takes a dual income to run a family now, then a dual income will also be required at retirement to maintain the standard of living.
Financial protection in times of crisis
According to the CANSA Association, 1 in 29 women is diagnosed with breast cancer, every year. The effects of such a diagnosis can be devastating, both emotionally and financially.
Making sure that you have cover in place that will pay out in an event of such a diagnosis will at least give you the peace of mind that your financial wellbeing is taken care of. Comprehensive critical illness cover will make sure that funds are available to protect your family and their lifestyle. Consider the impact that this type of disease could have on your lifestyle:
The last thing any blushing bride wants to consider is the fact that her marriage may come to an abrupt end, either as a result of divorce or death. Making sure that you understand the law relating to your marriage could save you heartache in years to come.
The three marital regimes provided for in terms of the Matrimonial Property Act:
When a woman starts a family she may choose to leave formal employment to be a full- time mom or work reduced hours with a flexible schedule. Here are some things to consider when you have children:
Generally, women live approximately seven years longer than men. A women of 65 will need approximately 15% more than a man of the same age to provide the same pesnsion for the rest of her life, so women really need to put careful thought into their retirement plans.
Leaving a legacy
All too often women underestimate the need for a valid will as part of a comprehensive financial plan. It is not as simple as leaving all your assets to your spouse or significant other.
A will gives you the oppertunity to provide a guardian for your child in the event of both parents passing away. You may wish to provide for your children using a testamentary trust. This allows you to choose the trustees who will manage the funds for your children and give certain instructions regarding distribution of income and capital. Consider that your surviving spouse may remarry or have more children. Without a will, there are no guarentees that your children will receive the legacy you intended for them.
Going through the process of drafting your will also allows you to consider the impact of the estate duties, income tax and expenses that can easily erode the inheritance you thought you were leaving.
Life cover is an affordable way of ensuring that cash is readily available when your dependants need it most.
Can the modern woman really have it all? Today, women have more oppertunities, choices and challenges than ever before. Women need to take control of their financial planning to make sure that they own their lives, especially in the event of a life- changing situation. Here are some things to consider when it comes to taking charge of your financial freedom.
Look after yourself first
A woman needs to have a financial plan that caters for her own needs.
If she has children or is thinking about starting a family, her retirement plan must take into account a possible break in employment, even if only for a short time, while she is on maternity leave.
If it takes a dual income to run a family now, then a dual income will also be required at retirement to maintain the standard of living.
Financial protection in times of crisis
According to the CANSA Association, 1 in 29 women is diagnosed with breast cancer, every year. The effects of such a diagnosis can be devastating, both emotionally and financially.
Making sure that you have cover in place that will pay out in an event of such a diagnosis will at least give you the peace of mind that your financial wellbeing is taken care of. Comprehensive critical illness cover will make sure that funds are available to protect your family and their lifestyle. Consider the impact that this type of disease could have on your lifestyle:
- Who would take care of your children? Whould you need an au pair to fetch them from school and other activities, supervise homework and dinnertime?
- Would you need someone to take care of household chores or drive you to treatments and doctor's appointments?
- Make sure that you can illiminate all other worries and focus on getting the best treatment possible.
The last thing any blushing bride wants to consider is the fact that her marriage may come to an abrupt end, either as a result of divorce or death. Making sure that you understand the law relating to your marriage could save you heartache in years to come.
The three marital regimes provided for in terms of the Matrimonial Property Act:
- Community of Property- the parties to the marriage share all profits and losses and are seen to have one undivided estate. Thus everything is shared equally.
- Ante- nuptial- contract (ANC)- this automatically includes the accrual system and is a community of profit, but not a community of loss, which comes into effect when the marriage ends. This is probably the most popular marriage regime of modern times. Assets required before the marriage may be exluded, but any growth in assets acquired during the marriage is shared equally when the marriage comes to an end.
- Ante- nuptial contract excuding accrual- the accrual system is expressly excluded and the parties have completely seperate estates. This is a marital regime often used where parties have already acquired significant wealth prior to their marriage.
When a woman starts a family she may choose to leave formal employment to be a full- time mom or work reduced hours with a flexible schedule. Here are some things to consider when you have children:
- Are your existing retirement benefits transferred into a Preservation Fund or Retirement Annuity to create a nest egg for the future?
- Are you accessing this amount now to reduce your costs and make your decision to stay at home more viable?
- Does the reduced income in the household allow you to continue with some form of retirement savings?
Generally, women live approximately seven years longer than men. A women of 65 will need approximately 15% more than a man of the same age to provide the same pesnsion for the rest of her life, so women really need to put careful thought into their retirement plans.
Leaving a legacy
All too often women underestimate the need for a valid will as part of a comprehensive financial plan. It is not as simple as leaving all your assets to your spouse or significant other.
A will gives you the oppertunity to provide a guardian for your child in the event of both parents passing away. You may wish to provide for your children using a testamentary trust. This allows you to choose the trustees who will manage the funds for your children and give certain instructions regarding distribution of income and capital. Consider that your surviving spouse may remarry or have more children. Without a will, there are no guarentees that your children will receive the legacy you intended for them.
Going through the process of drafting your will also allows you to consider the impact of the estate duties, income tax and expenses that can easily erode the inheritance you thought you were leaving.
Life cover is an affordable way of ensuring that cash is readily available when your dependants need it most.
Monday, July 12, 2010
So where do you start saving?
The golden rule of saving is to "start with a plan".
To draw up a plan, you need to know what your end goal is and what you need in money terms to get you there. The following steps can help you to draw up your plan and stick to it!
To draw up a plan, you need to know what your end goal is and what you need in money terms to get you there. The following steps can help you to draw up your plan and stick to it!
- What are your savings goal? Everyone needs a reason/s to save, e.g. to achieve retirement savings of R1 million, to be debt- free (no home or car loans) by age 40, etc.
- How much money do you need to reach a goal?This will help you determine what you shoul be saving or investing every month.
- Draw up a realistic monthly budget. This is one of the most effective tools to see where your money is going and what disposable income is available at the end of the month. A budget is simply adding up all your monthly expenses (rent, bond, and car repayments, insurnace, retirement fund contributions- including AVC's- electricity, etc) and subtracting it from your nett monthly income. Any money that is left over is called disposable income.
- What can I do with my spare cash? Your disposable income should not be used to generate more expenses, but to pay off any debts or, if you are debt- free, to invest towards meeting your goals. To be financially stable, you need to prioritise your needs and wants at each stage of your life. Pay off accounts or credit cards with the highest interest rate first. Returns on your investments are unlikely to be higher than the interest rates on these cards. Then pay off your debts, e.g. home loan, car etc. as quickly as possible. A debt management plan can help you to get rid of your debt.
- When do I start investing? The golden rule of investing is not to invest if you have debt. With some emergency cash stashed away, a debt- reduction plan in place and a secure insurance safety- net, you are ready to consider investing.
- Getting help. Please speak to a financial advisor.
- Monitor your bidget, needs and savings to ensure that you are on track with your financial plan, that your needs have not changed and to see how your savings are growing.
Friday, March 26, 2010
You cannot outsource your future
In today’s newsletter we take a look at the findings and trends coming out of the latest Old Mutual Retirement Funds Survey. The findings were presented yesterday in Johannesburg and they show awareness of retirement issues, but also some less than favourable realities. And while these may be concerning – at least we know what they are. Service executive at Old Mutual Corporate, Mkuseli Mbomvu gave the following quote yesterday – a problem well defined is a problem half solved. At one glance the facts and figures, perceptions and realities around retirement in South Africa look like a huge problem. Throw that glass out – and it becomes obvious that this is also an area of immense opportunity.
The Money Marketing Newsletter will be participating in the long weekend coming up and will not be appearing next week. We wish you all a very safe long weekend that is filled with happiness and relaxation.
Retiring financially independent
6% of South Africans retire financially independent. Craig Aitchison, MD of Old Mutual Actuaries and Consultants says we need to look at this as these 6% being able to retire with no change in standard of living.
A quarter receive assistance from family members
In the Old Mutual Retirement Monitor, 53% of pensioners surveyed felt a drop in their standard of living when they retired and 25% said this drop was a big one. Only 17% felt that their pension had kept up with inflation, 51% said it was a bit behind inflation and a third felt it was far behind inflation.
On average – pensioners said that their pension meets 77% of their retirement needs. 23% currently receive financial assistance from their children or other family members – and this assistance amounts to almost a quarter of their monthly income.
These are the findings of the first Old Mutual Retirement Monitor, which examines pre-retirement perceptions amongst working South Africans. The Monitor also surveyed pensioners.
(The Old Mutual Retirement Monitor and Old Mutual Retirement Survey are two different research projects. The Old Mutual Retirement Survey aims to understand changes in the retirement industry and looks at a range of issues from perceptions of the industry, governance, types of funds and investments and communication to fund members. The Monitor surveyed primarily working metropolitan households and the Survey collected data from funds, government, media and industry bodies, trustees and intermediaries.)
Where the money comes from
While the pensioners surveyed in the Monitor on average said that 77% of their pension meets their needs, those in pre-retirement and saving for retirement with a pension fund said that they expected 60% of their post retirement income to come from a pension. Other sources include retirement annuities, cash savings, endowments and other income (eg working after retirement part time). Of those who are not members of a pension/provident fund they expect 48% of their retirement income to come from cash savings.
One of the emerging trends that the Old Mutual Retirement Fund Survey found was a move to a later retirement date. In South Africa, Seelan Gobalsamy, MD of Old Mutual Corporate, says that we are starting to see people asking the question about retirement date and age. People are retiring – and then in some cases contracting back or entering the SME market. Supplementing income in retirement was also borne out in the Monitor findings – where pre-retirees expect some funds to come from other sources including working – and those who don’t belong to a pension fund are probably more likely to work for longer.
When it comes to retirement from an individual perspective – the ultimate goal is to make sure the money outlasts the individual.
So is there enough to retire on?
The Survey found that only 43% of members think they have enough to retire on. Not enough funds measure adequacy – the Survey found that only 52% of funds measure adequacy.
Preservation does not happen
Preservation remains almost non-existent – 93% of those interviewed in the Survey agree that preserving retirement savings is important – but 99% of those that exited Old Mutual Umbrella Funds last year did not preserve. And while often, cash is needed when employment ends (particularly noteworthy in South Africa where unemployment is such a problem); the survey found that there is a higher level of awareness around the cash option when leaving a fund rather than preservation, and a lack of understanding of the consequences of not preserving. Intermediaries who responded in the Survey are one of the keenest proponents of preserving.
Communication and understanding of the retirement issues
One of the most notable points to come out of the findings was the low level of member engagement on funds and awareness of the issues.
While communication with members was highlighted as an ongoing trend – it seems that this is an area where we still have a long way to go. The Survey found that communication to members was still largely printed material and that despite the continued emphasis on communication; there were still low levels of understanding. Hugh Hacking, Umbrella Fund product manager at Old Mutual Corporate says that an increasing number of funds have recognised the shortcomings of relying on written material and in line with member preference – personal communication (like workshops) is more popular.
This was also evident in the Monitor findings.
The Monitor found that pre-retirees are largely unaware of the trustees of the fund, the investment managers and types of assets the fund invests in.
Only 20% know the trustees by name, 30% know which company the trustees are from. Only 15% voted in the most recent trustee election. 45% know who manages the investment but only 24% claim good knowledge of where the assets of their retirement fund are invested. (18% are vague and 58% don’t know where the assets are invested.)
Despite this low level of engagement there is a high level of trust and confidence in trustees. On a scale of 1 – 10 where 10 is completely confident – both trust and confidence score 7.3. (the trustees are making decisions in the interests of the members and that members are confident in the abilities and knowledge of the trustees). Aitchison says this is more a confidence in the office of trustee – so members view a trustee, by virtue of being a trustee, as acting in their best interests.
The levels of knowledge become more disturbing - 65% of those surveyed in the Monitor don’t know what percentage of their salary they contribute to their retirement fund. (67% contribute less than 10% of their salary to a retirement fund each month.)
Member communication and knowledge is clearly an area where there is massive opportunity. From the findings it would be logical to deduce that current member communication is having very little impact. If only 15% of members are voting for trustees and various findings show that knowledge around retirement funds are limited at best, the need for clear, new, innovative and professional financial education at all levels is evident. We need to ask questions that go right back to basics. Financial education has never been so important.
Questions to ask:
Do you belong to a retirement fund, what is this fund, where is it invested, who are the trustees, how are investment decisions made, who makes these decisions, what do they base their decisions on, how do they know what your needs are? And if you are not in a fund ask the same questions – of your current financial plan (or get a plan). If you are invited to a workshop or presentation on the pension fund – go. When you need to vote for trustees ask them who and what they are and how they will manage the fund.
It is good that we are saving for retirement. It is not good that we don’t know enough about it.
Start out from a basis of knowledge and responsibility
Retirement is a long term liability. As important as it is to minimise short term debt, it is even more important to provide for long term debt. It is not easy providing for retirement, we have to save a lot (even with the latest rate cut), and it will involve sacrifices. It is a responsible action and it is an individual responsibility.
The retirement landscape has changed enormously in a short space of time. Defined benefit has given way to defined contribution, (and it seems from the surveys that knowledge on this is also sketchy) and we have dramatically increased our life expectancy (often with a higher associated cost). We also have to deal with the spectre of inflation.
Rightly or wrongly funding for retirement has become the individual’s responsibility.
The Monitor findings show that there is still a perception that someone else (eg state) will provide. This is unlikely (and is even more unlikely to be sufficient). We have to provide. We cannot outsource our future to someone we think will do a good job – we have to ask the questions and find the information to make sure that the best as is possible is done.
The responsibility shift to the individual has not meant that the industry has become more understandable to the individual. There is an awareness of the need to and the importance of saving for retirement – but the intricacies and details have not reached the individual. This is a responsibility we all need to take. As members and savers we need to speak up.
Become a difficult member and consumer
Ask every question you need to until you get an answer you understand and are satisfied with.
Be aware of investment returns – and that investment returns while an important part of your goal are not your goal. The goal is to retire financially independent.
Make sure that at least five years to retirement you have as comprehensive a review as possible and start looking at your objectives and options on retirement from funds and other investments – what kind of an annuity are you looking to buy, how much should you derisk and into what investments, can you keep investing if there is supplementary income, what are the inflation expectations and how will they affect in the long and short term.
While retirement may not be a certain future for all of us - it is a certain and long future for a lot of us. Just as avoiding tax is a very unwise thing to do – so too is avoiding the retirement issues.
The opinion and comment in this newsletter is opinion and comment only and does not constitute financial advice in any way – please consult a professional adviser for all retirement and investment needs.
Source: Money Market Newsletter (no: 250310)
The Money Marketing Newsletter will be participating in the long weekend coming up and will not be appearing next week. We wish you all a very safe long weekend that is filled with happiness and relaxation.
Retiring financially independent
6% of South Africans retire financially independent. Craig Aitchison, MD of Old Mutual Actuaries and Consultants says we need to look at this as these 6% being able to retire with no change in standard of living.
A quarter receive assistance from family members
In the Old Mutual Retirement Monitor, 53% of pensioners surveyed felt a drop in their standard of living when they retired and 25% said this drop was a big one. Only 17% felt that their pension had kept up with inflation, 51% said it was a bit behind inflation and a third felt it was far behind inflation.
On average – pensioners said that their pension meets 77% of their retirement needs. 23% currently receive financial assistance from their children or other family members – and this assistance amounts to almost a quarter of their monthly income.
These are the findings of the first Old Mutual Retirement Monitor, which examines pre-retirement perceptions amongst working South Africans. The Monitor also surveyed pensioners.
(The Old Mutual Retirement Monitor and Old Mutual Retirement Survey are two different research projects. The Old Mutual Retirement Survey aims to understand changes in the retirement industry and looks at a range of issues from perceptions of the industry, governance, types of funds and investments and communication to fund members. The Monitor surveyed primarily working metropolitan households and the Survey collected data from funds, government, media and industry bodies, trustees and intermediaries.)
Where the money comes from
While the pensioners surveyed in the Monitor on average said that 77% of their pension meets their needs, those in pre-retirement and saving for retirement with a pension fund said that they expected 60% of their post retirement income to come from a pension. Other sources include retirement annuities, cash savings, endowments and other income (eg working after retirement part time). Of those who are not members of a pension/provident fund they expect 48% of their retirement income to come from cash savings.
One of the emerging trends that the Old Mutual Retirement Fund Survey found was a move to a later retirement date. In South Africa, Seelan Gobalsamy, MD of Old Mutual Corporate, says that we are starting to see people asking the question about retirement date and age. People are retiring – and then in some cases contracting back or entering the SME market. Supplementing income in retirement was also borne out in the Monitor findings – where pre-retirees expect some funds to come from other sources including working – and those who don’t belong to a pension fund are probably more likely to work for longer.
When it comes to retirement from an individual perspective – the ultimate goal is to make sure the money outlasts the individual.
So is there enough to retire on?
The Survey found that only 43% of members think they have enough to retire on. Not enough funds measure adequacy – the Survey found that only 52% of funds measure adequacy.
Preservation does not happen
Preservation remains almost non-existent – 93% of those interviewed in the Survey agree that preserving retirement savings is important – but 99% of those that exited Old Mutual Umbrella Funds last year did not preserve. And while often, cash is needed when employment ends (particularly noteworthy in South Africa where unemployment is such a problem); the survey found that there is a higher level of awareness around the cash option when leaving a fund rather than preservation, and a lack of understanding of the consequences of not preserving. Intermediaries who responded in the Survey are one of the keenest proponents of preserving.
Communication and understanding of the retirement issues
One of the most notable points to come out of the findings was the low level of member engagement on funds and awareness of the issues.
While communication with members was highlighted as an ongoing trend – it seems that this is an area where we still have a long way to go. The Survey found that communication to members was still largely printed material and that despite the continued emphasis on communication; there were still low levels of understanding. Hugh Hacking, Umbrella Fund product manager at Old Mutual Corporate says that an increasing number of funds have recognised the shortcomings of relying on written material and in line with member preference – personal communication (like workshops) is more popular.
This was also evident in the Monitor findings.
The Monitor found that pre-retirees are largely unaware of the trustees of the fund, the investment managers and types of assets the fund invests in.
Only 20% know the trustees by name, 30% know which company the trustees are from. Only 15% voted in the most recent trustee election. 45% know who manages the investment but only 24% claim good knowledge of where the assets of their retirement fund are invested. (18% are vague and 58% don’t know where the assets are invested.)
Despite this low level of engagement there is a high level of trust and confidence in trustees. On a scale of 1 – 10 where 10 is completely confident – both trust and confidence score 7.3. (the trustees are making decisions in the interests of the members and that members are confident in the abilities and knowledge of the trustees). Aitchison says this is more a confidence in the office of trustee – so members view a trustee, by virtue of being a trustee, as acting in their best interests.
The levels of knowledge become more disturbing - 65% of those surveyed in the Monitor don’t know what percentage of their salary they contribute to their retirement fund. (67% contribute less than 10% of their salary to a retirement fund each month.)
Member communication and knowledge is clearly an area where there is massive opportunity. From the findings it would be logical to deduce that current member communication is having very little impact. If only 15% of members are voting for trustees and various findings show that knowledge around retirement funds are limited at best, the need for clear, new, innovative and professional financial education at all levels is evident. We need to ask questions that go right back to basics. Financial education has never been so important.
Questions to ask:
Do you belong to a retirement fund, what is this fund, where is it invested, who are the trustees, how are investment decisions made, who makes these decisions, what do they base their decisions on, how do they know what your needs are? And if you are not in a fund ask the same questions – of your current financial plan (or get a plan). If you are invited to a workshop or presentation on the pension fund – go. When you need to vote for trustees ask them who and what they are and how they will manage the fund.
It is good that we are saving for retirement. It is not good that we don’t know enough about it.
Start out from a basis of knowledge and responsibility
Retirement is a long term liability. As important as it is to minimise short term debt, it is even more important to provide for long term debt. It is not easy providing for retirement, we have to save a lot (even with the latest rate cut), and it will involve sacrifices. It is a responsible action and it is an individual responsibility.
The retirement landscape has changed enormously in a short space of time. Defined benefit has given way to defined contribution, (and it seems from the surveys that knowledge on this is also sketchy) and we have dramatically increased our life expectancy (often with a higher associated cost). We also have to deal with the spectre of inflation.
Rightly or wrongly funding for retirement has become the individual’s responsibility.
The Monitor findings show that there is still a perception that someone else (eg state) will provide. This is unlikely (and is even more unlikely to be sufficient). We have to provide. We cannot outsource our future to someone we think will do a good job – we have to ask the questions and find the information to make sure that the best as is possible is done.
The responsibility shift to the individual has not meant that the industry has become more understandable to the individual. There is an awareness of the need to and the importance of saving for retirement – but the intricacies and details have not reached the individual. This is a responsibility we all need to take. As members and savers we need to speak up.
Become a difficult member and consumer
Ask every question you need to until you get an answer you understand and are satisfied with.
Be aware of investment returns – and that investment returns while an important part of your goal are not your goal. The goal is to retire financially independent.
Make sure that at least five years to retirement you have as comprehensive a review as possible and start looking at your objectives and options on retirement from funds and other investments – what kind of an annuity are you looking to buy, how much should you derisk and into what investments, can you keep investing if there is supplementary income, what are the inflation expectations and how will they affect in the long and short term.
While retirement may not be a certain future for all of us - it is a certain and long future for a lot of us. Just as avoiding tax is a very unwise thing to do – so too is avoiding the retirement issues.
The opinion and comment in this newsletter is opinion and comment only and does not constitute financial advice in any way – please consult a professional adviser for all retirement and investment needs.
Source: Money Market Newsletter (no: 250310)
Thursday, March 25, 2010
8 Good Reasons why you should have a Retirement Annuity
1. Contributions tax deductible up to
a. 15% of non-retirement funding taxable income, or
b. R3500 minus allowable pension fund contributions, or
c. R1750
2. During the investment term savings within retirement funds is not taxed.
3. Tax treatment of one third cash lump sum of retirement annuity proceeds.
a. Tax free portion: R300 000 plus contributions made to retirement funds which were previously disallowed as a deduction.
b. Less tax-free portions of retirement funds already utilized
4. Two thirds of retirement annuity proceeds to purchase a compulsory annuity.
a. Wide choice of annuity options
b. Can be guaranteed for a fixed term, or
c. Guaranteed income for life
d. Taxable as income
5. Protected against claims from creditors – with certain exceptions.
6. Protected in case of emigration – the remittal of retirement annuities must always take place with the approval of the exchange control annuities.
7. Investors have the option to increase contributions to combat the effect of inflation.
8. A retirement annuity allows disciplined savings for retirement and is also ideal for self-employed persons or small businesses.
Tuesday, March 2, 2010
Retirement Planning (Continued)
Start saving early
The sooner you start saving the sooner you can earn interest on your savings and then earn interest (compound interest)
A recent Alexander Forbes survey showed that people cash out their pensions 90% of the time when changing jobs and end up paying tax on their savings
If you contribute 15% of your salary to retirement savings for 5 years, your pension will be equal to about one year’s salary.
If you save 15% of your salary from the age of 25, only a third of the benefit you receive at retirement will come from your contributions. The rest will be from growth.
The sooner you start saving the sooner you can earn interest on your savings and then earn interest (compound interest) Another way of looking at it is how much more you will have to save to get 90% of your salary at retirement
Starting age 25 35 45
Percentage of salary you need to save in order to achieve 90% income at retirement:
15% at the age of 25; 25% at the age of 35; 47% at the age of 45
Save your bonus
You can build up your retirement “bonus” by taking advantage of the tax free allowance and saving 15% of each bonus into a retirement vehicle.
Don’t cash out your savings before retirement
If you contribute 15% of your salary to retirement savings for 5 years, your pension will be equal to about one year’s salary.
Tuesday, February 16, 2010
Financial Health in Mid Forties & Fifties
Retirment is a scary thought. You are without an income for the most part, unemployable. If you aren't prepared, you face an uncomfortable and uncertain future.
Many business owners get so caught up in the running of their business, they forget to think about the future. But when it comes to retirement, you can't afford to seperate your personal finances from those in your business. At the same time, you have the well- being of your employees (for those of you that have employees). Even though there is no current law that you have to provide for their retirement, it's your moral duty to at least help them plan for the future.
None of us can predict the future. But you need to ensure that you are prepared for eventualities like death, disability, illness and dread disease. The reality is that they can hit you and your business or family hard.And imagine it happened to one of your partners, shareholders or employees. What if you lost them to death or disability? It's not a pleasant thought, but think of the capital you'd need to replace key employees, settle loans or buy out a partner. What if you didn't have enough? You'd risk losing everything you've worked so hard to create.
The older we get the more dificult it is to get this type of insurance. Is yours in place?
Each of us have different needs and goals in life. Therefore our financial solutions would differ. In our fourties we should know what our goals are, or at least have some indication as to how we're going to reach these goals? Or maybe you've reached most of your goals and you're ready to retire and travel the world? Have you got it all planned?
Your Will?
Your Medical Aid?
Financially sound, with enough options to cater for our needs, ie our needs get bigger the older we are?
Many business owners get so caught up in the running of their business, they forget to think about the future. But when it comes to retirement, you can't afford to seperate your personal finances from those in your business. At the same time, you have the well- being of your employees (for those of you that have employees). Even though there is no current law that you have to provide for their retirement, it's your moral duty to at least help them plan for the future.
None of us can predict the future. But you need to ensure that you are prepared for eventualities like death, disability, illness and dread disease. The reality is that they can hit you and your business or family hard.And imagine it happened to one of your partners, shareholders or employees. What if you lost them to death or disability? It's not a pleasant thought, but think of the capital you'd need to replace key employees, settle loans or buy out a partner. What if you didn't have enough? You'd risk losing everything you've worked so hard to create.
The older we get the more dificult it is to get this type of insurance. Is yours in place?
Each of us have different needs and goals in life. Therefore our financial solutions would differ. In our fourties we should know what our goals are, or at least have some indication as to how we're going to reach these goals? Or maybe you've reached most of your goals and you're ready to retire and travel the world? Have you got it all planned?
Your Will?
Your Medical Aid?
Financially sound, with enough options to cater for our needs, ie our needs get bigger the older we are?
Monday, February 15, 2010
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