Nearing retirement

Now is the time to reap the fruits of years of hard work.

The focus is shifting from the accumulation of wealth to the generation of income, as your needs will fundamentally change after retirement.

One of the major risks that need to be addressed in any retirement plan, concerns the reality of ever increasing life expectancies of our clients (longevity risk). Longevity risk or the risk of outliving one’s financial provision (savings) is from many perspectives not a simple matter to address. There are a wide range of factors which must be considered, for example:

  • Overall levels of wealth, whether you have reasonably accumulated enough to last for an extended lifetime.
  • Changes to spending patterns throughout the phases of retirement (active, passive, frail),
  • The cost associated with private sector medical products and services.
  • Behavioural biases for example the inability to make long term decisions.

Consider the following table on the income (p.a.) you may draw from your accumulated wealth:

Age 55 60 65 70 75 80 85 & older
Male 5.50% 6.20% 7.30% 8.70% 10.70% 13.50% 17.50%
Female 4.80% 5.40% 6.20% 7.30% 8.90% 11.20% 14.60%

Statistics show that more than 75% of clients in South Africa realise at some stage that the amount of savings accumulated will not be enough to address their income needs. But even more important is the fact that many clients forget to consider the tax implications of their investment decisions. Tax can potentially erode your wealth and it is evident that tax concessions in South Africa will continue to favour the poor that are not investors.

Pentagon Financial Solutions PTA (Pty) Ltd can provide a client with advice and the appropriate product solutions.  This may inter alia include the structuring of more than one investment vehicle to provide tax efficient income after retirement.  Savings can be invested within a diversified portfolio, structured according to a client’s individual risk profile, to assure that sufficient income is generated to provide an adequate standard of living after retirement.