Retirement plans may fail you

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Traditionally, people work on the idea of saving a certain amount – such as 15 times their annual salary – to cover their needs in retirement. But these plans may be upset by factors that cannot be built into typical retirement savings calculations. According to an article by Laura du Preez in Personal Finance (6 June 2015), targeting a particular lump sum with the view to it sustaining your desired income in retirement may be a bad idea, especially if you assume that you will continue to enjoy high real […]
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Fulfilling retirement not only about money

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Although you should be concerned about your financial security in retirement, having sufficient money will not necessarily buy you happiness. According to John Anderson, head of research and product development at Alexander Forbes, it is important to prioritise your spending according to your needs and financial resources. A good way to achieve contentment and financial stability before and during retirement is to base your spending on Maslow’s hierarchy of needs. This is often portrayed as a pyramid with the largest, most fundamental levels of needs at the bottom and the […]
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Make the most of discounted bank rates

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Most banks offer special rates for people over the age of 55 or 60, which include reduced transactional fees and preferential interest rates on fixed deposits. But there are catches: lower or zero costs are mostly conditional on you maintaining a fairly substantial minimum balance in your account, or a substantial amount in a linked savings account. Another condition of avoiding high charges is that you make use of technology. Not all pensioners have substantial savings that they can use to maintain a high minimum balance. And many older pensioners […]
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Avoid these retirement risks

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Ken Russell, a financial adviser at Alexander Forbes, offers these insights into common financial risks facing us when we reach retirement age. [Source: Personal Finance in The Independent on Saturday, 21 March 2015] PRE-RETIREMENT RISKS The financial risks you face before you retire are: Waking up too late to the need to save. Unexpected life events. Divorce or illness can seriously affect your finances. Russell says that it can take 10 years to recover financially from a divorce. Forced early retirement. Most retirement funds plan on you retiring at age […]
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Have you saved enough for your retirement?

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This article by Patrick Cairns, published on MoneyWeb, may shock you.   When it comes to saving for retirement, the majority of us underestimate how much we will actually need … or we leave it too late to start, and then cannot accumulate sufficient wealth. For example, if you currently earn R30 000 per month, and you want to continue enjoying the same level of income after you retire, you need to have built up R9 million capital in order to match your current salary. Even this is an educated […]
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What will your retirement look like?

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According to the recently released BankservAfrica Private Pension Index, more than half of retirees in South Africa receive a pension of less than R4000 per month. The Index covers 85% of all pension payments that pass through BanksevAfrica’s clearing system. The organisation also monitors the salaries that bank customers are paid through the payment clearing system. On average, pensions amount to only 45% of salaries (after tax and other deductions) earned by employees in the formal sector. There is little that pensioners already in retirement can do if their pensions […]
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Will you be able to afford medical aid when you retire?

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As you age, your need for health cover increases. Ideally, you need a plan with hospital cover, high chronic benefits and high day to day cover. But unless you have saved a substantial amount to cover medical aid contributions after retirement, you may find such an option completely unaffordable. A 58 year old single woman who plans to retire at age 60 will need to have saved R1 million to fund medical aid contributions throughout her retirement. A married man aged 58, who wants to retire at 60, needs to […]
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Index forecasts a lower pension when you retire

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The average retirement fund member in their 40s or 50s may retire with only half to two-thirds of the pension they expect, as returns on retirement savings are expected to be lower in future. This is highlighted in the latest Alexander Forbes Pensions Index, which shows changes over the last 12 years since the index was launched. The Alexander Forbes Pension Index tracks four savers born on 1 January 1982, 1 January 1972, 1 January 1962 and 1 January 1952. On 1 January 2002, they were 30, 40 and 50 years old […]
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Retirement tax reforms postponed

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The proposed increased tax benefits for retirement fund contributions have been put on hold for at least a year. As a result, transfers from pension to provident funds will continue to be taxed. Provident fund members are also required to buy an annuity on retirement, which may disqualify them from receiving the old age grant.
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