Choose your retirement conditions

2010-09-04 13:15

Poor financial planning, combined with the fact that employers are stingy or cry poverty when it comes to providing financial literacy programmes for ­employees has led to many employees going on retirement financially ill-prepared to face the challenges of a reduced income.

Statistics show that income drops by as much as 60% when an individual retires. This means for every rand earned during employment, the retiree may end up receiving only 40c in retirement.

Many workers buy property late in their working lives and, as a result, when retirement age arrives, many have to settle their bonds and other debts from their retirement benefit. ­Depending on those debts, the retirement capital could shrink so badly that it provides ­income that is even below 40%.

I have realised that many retirees from provident funds elect to receive their full benefit where fund rules do not stipulate that two thirds of the benefit should purchase an annuity.

People who do this often end up in a business venture such as taxi driving to boost their post­retirement income. Most of them fail because running a business is never easy.

The absence of a culture of saving and the fact that people have only employer retirement funds as retirement savings, are the main reasons that post-retirement income drops so much.

Even the products, such as living annuities which allow a retiree to choose market-linked portfolios, come with the risk associated with markets.

The lesson here is that a personal financial position, health, family circumstances and resourcefulness dictate the ideal retirement savings plan.

An individual’s failure to adequately plan their retirement often leads to many years of old-age destitution and dependency on charity.

There is new legislation that forces advisers and insurance companies to fully disclose various ­scenarios and how levels of drawdown (the drastic plummeting of an investment during a specific period) impact on capital invested and how this could affect an annuitant over time.

This means annuitants from compulsory sources such as pension and retirement funds may not get the leeway of electing drawdowns that could ­possibly exhaust their capital. The law will ensure that correct products are sold and also force advisers to continually consult and advise their clients.

  • Diale is a financial planner. He can be contacted on 078 775 0802

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.