Retirement – Decisions, Decisions, Decisions

The stress of finding the right balance between saving adequately for retirement while spending on daily necessities, is becoming more difficult as time ticks on. Are you saving enough for retirement? Do you have sufficient funds for health care costs, education and the basic necessities? You visualise funds flowing out of your hands, but not much flowing into your hands.

Decisions, Decisions, Decisions… Life is a book of decisions, and you are the author of your life’s story. In this article, we explain some of decisions you can make now to have a lifestyle that you would want for retirement.

Purchasing an Annuity Income

As a retiree, you have the option of purchasing a living annuity, a guaranteed life annuity or both, depending on your needs. Guaranteed Life annuities pay a fixed income with annual increases, while living annuities give you much more flexibility by allowing you to select a drawdown percentage between 2.5% and 17.5% per annum. So, make sure that you choose wisely to alleviate the risk of outliving your capital.

Retirement Annuity

When you retire and your retirement annuity matures, you can withdraw a maximum of 1/3 of the fund value as a cash lumpsum. The balance 2/3 of the fund value needs to be used to purchase an annuity income as discussed above.

A common misconception is that your retirement annuity matures when you are 55 years of age, but this is not the case. A retirement annuity does not have a maximum retirement age. You can retain it until the day you decide to retire after age of 55 years. It is advisable to keep it as long as possible, to further supplement your broader retirement plan.

Selling off your Primary Residence

At the time of retirement, you decide to downsize your primary residence as the maintenance and upkeep of your home and garden become unmanageable. Your children are now adults and have moved on with their own independent lives. The time has come to rethink your needs and make decisions to supplement your broader retirement plan. Timing the sale of your primary residence, in accordance with favourable market conditions, becomes critical to realise maximum profits.

Budget, Persistence and Unexpected Expenditure

An important part of retiring is to prepare and stick to a budget. Be persistent in your savings. The more you decide to save, the more lucrative your broader plan of retirement will be. But be cautious for those desired travel expenditures. Every retiree wants to travel the world on retirement but many fail to include these travel expenditures in the broad retirement plan. International travel is expensive and can have a severe impact on your retirement savings. Other unexpected expenditure of retirement to consider, is the purchase of a luxury vehicle, settlement of home loan debts, uncovered health care costs, inflation, entertainment, financial assistance to adult children, just to name a few.

Decisions, Decisions, Decisions…. Be smart and ensure that you take the right decision in your life’s journey, as all your decisions you take, are inter-linked to your broader and ultimate plan of retirement. We, at Master Builders KwaZulu-Natal, can assist employers in this decision-making process and together we can make your retirement plan dreams, a reality.

Master Builders KwaZulu-Natal are the administrators of the KwaZulu-Natal Retirement and Provident Funds. The benefits contained in the funds that we administer are highly competitive and have been enhanced at no additional cost.

Some of the benefits include funeral cover based on a R40,000 sliding scale, and death benefits based on a multiple of 5 times annual pensionable salary. Our benefits also consist of a disability benefit amounting to 75% of monthly salary if a fund member is deemed to be disabled.

Call us on 031 831 3217 or email benefits@masterbuilders.co.za to find out more about our highly competitive offerings.
We look forward in walking this journey with you.

Reetesh Balgobind | Accountant

References:

1. www.moneyweb.co.za/financial-advisor-views/key-decisions-to-be-made-at-retirement by Eric Jordaan - Crue Invest (Pty) Ltd
2. www.moneyweb.co.za/in-depth/living-annuities/guaranteed-life-annuities-versus-living-annuities by Ryk van Niekerk
3. www.glacierinsights.co.za/blog/retirement-insights/lump-sum-retirement-annuity-payment - What the experts do with their 1/3 lump-sum payment