Have you saved enough for retirement?

Cape Town - Knowing whether you have saved enough for retirement is one of the primary causes of financial anxiety for pre-retirement investors, according to Duggan Matthews of income specialist company Marriott.
 
"The current investment environment, characterised by economic uncertainty, coupled with a choice of over 1 000 unit trusts and a myriad of different products, has made it increasingly difficult to make informed investment decisions," he explained.

"In order to plan for retirement, it is, therefore, important to filter out the ‘noise’ and focus on the information you really need to know."

This would include how much income your savings will generate in retirement.

"If the income element of an investment could be reliable and consistent, then the future outcome of that investment could be predicted with a high degree of certainty," said Matthews.

"Information about the income produced by an investment is the key to knowing whether you are saving enough today to sustain your lifestyle in the future."

This income focused approach to investing would typically look at companies which focus on basic necessities, enjoy country wide distribution and have strong balance sheets.

"These companies tend to fare well in both recessionary and growth phases of the economic cycle and are seldom at the mercy of a new idea, trend or fashion," said Matthews.

Tax efficiency

In Matthews' view, one of the most tax efficient means of saving for retirement outside of the workplace is through a retirement annuity.

"Not only is the income earned exempt from all forms of tax, but the contributions made are deductible, subject to certain limits," he explained.

"While the annuity earned from these savings is fully taxable during retirement, the benefits of tax-free capital accumulation from the re-investment of income, coupled with a likely lower marginal tax rate on retirement, makes this a highly tax efficient savings vehicle."

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