Retirement planning is a long journey, one which once-off decisions are unlikely to cut it in the long run. Your initial plans need to change to reflect the changing environment and to cater for your changing needs.
You may think that because I already have a retirement annuity (RA); I’m sorted for life. But in reality, many people don’t review their investment options as often as they should. Some are still invested in the same underlying funds they chose when they were in their first job.
After protracted market volatility that we’ve witnessed since the 2008 recession requires people to look at retirement plans that will allow them to take advantage of cost efficient innovations while at the same time shielding themselves from market downturns.
Sanlam’s Cumulus Echo Retirement Plan (RA) offers both of these benefits. And the great part is that you can move your existing Sanlam RA to Cumulus Echo – free of charge.
When you move to the Cumulous Echo RA, the entire fund value of your existing Sanlam RA is transferred. For more info reach me at Tshepho Chokoe.
So, why move to the Cumulus Echo RA?
- This RA offers a unique Echo Bonus that boosts your savings at retirement – the longer you save, the bigger the Echo Bonus will be at retirement.
- It comes with an optional investment guarantee that allows you to take advantage of rising markets, while protecting your investment when markets are volatile.
- Cumulus Echo offers a wide range of investment funds at the lowest possible cost giving you more opportunities to maximise your investment return.
- Savings are automatically managed with Lifetime Investment Options, reducing the risk of losing growth closer to retirement.
Let’s go straight to the business of the day…
Step 1: WHY do you want to save?
Ask yourself what do you want to archive in 5 to 20 years or many more years to come before you start saving because there’s a high chance that you will cancel your savings plan if you don’t have specific goal and if so you will suffer the consequences… yes penalties. Always think about investment time horizon and your liquidity requirements. Your individual circumstances will help shape your investment goals.
Step 2: Talk to your peers about best financial advisors/fund managers around.
We have different insurance companies or banks that may have performed well in the recent past, but it’s still advisable to look at that company or bank’s track record. It is also useful to establish whether they have managed funds through both bull and bear markets. For more info talk to me, Tshepho Chokoe.
Step 3: Understand the investment company’s objectives and their investment philosophy.
A company’s website and fund fact sheets should provide an understanding of what a fund is aiming to achieve, who the key investment personnel are, and what the investment process is. From an investor’s perspective, different investment philosophies will resonate with different people. There’s no right or wrong philosophy, but it is important to know how the manager you choose will manage risk and protect capital when markets are falling.
Step 4: Understand the fund categories.
If you understand your risk profile, you can select from one of the multi-asset categories that cater to various investment profiles, from conservative through to aggressive. The more aggressive the fund, the higher the level of risky assets it will hold. To determine if you are conservative and aggressive investor, talk to me, Tshepho Chokoe.
Step 5: Understand the costs.
The fund fact sheet will reflect the total expense ratio (TER) of the fund. Fees can have a considerable impact on your eventual investment return, so make sure you are paying a fee that is reasonable compared to those of other funds in the same category.
Step 6: Monitor your savings.
Ideally, a medium- to long-term investment should be left to grow and short-term volatility should be ignored. However, you should take note of changes that may affect your investment, such as fund manager changes or fee changes. You usually receive quarterly statements on how your savings are performing.
Single person will protect his or her lifestyle in ways that are different from those of a married person with children, or someone preparing to retire.
Each phase of life requires different plans and solutions. As we encounter various life events, so do our needs change.
I want to help you plan ahead.
The need for insurance typically address:
- Providing for your family and paying off debt if you die.
- Protecting your income and paying off debt if you become disabled.
- Providing for medical expenses and lifestyle adjustments if you become critically ill.
- Providing for long-term nursing care if you become impaired.
- Providing for a long but expensive life with a disability or critical illness.
- Income replacement benefits – catering for existing expenses and debt if you die or become temporarily or permanently disabled.
- Lifestyle protection benefits – catering for new expenses brought about by a critical illness, impairment or death.
- The benefits most commonly used to cater for these needs are:
- Disability Benefits
- Critical Illness Benefits
- Impairment Benefits
- Future Insurability Benefits
- Life insurance benefits
Loss is defined for insurance purposes as unintended, unforeseen damage to property.
In the context of insurance, exposure is the possibility of a loss. It simply means the degree to which a person or property is vulnerable to risk or to the possibility of loss
Common Loss Exposures
The probability that an event will occur is called a chance of loss or an exposure to loss.
I. Personal Losses
Illness, injury and premature death are all examples of personal loss exposures.
II. Property Losses
Car accidents, house fires and storm damage to businesses are examples of property loss. Property loss involves the destruction of personal or commercial property.
III. Liability Losses
Liability loss exposure means the potential to become legally responsible for injuries of others or damages to someone else’s property. For example, if your dog bites a small child, you may be liable for the child’s injuries. Likewise, if you have a car accident and are held at fault, you may be required to pay for any injuries or damages that result.
Direct loss refers to actual physical loss, destruction or damage to property—for instance, the loss caused by a fire as well as other damage for which the fire was the proximate cause, such as water damage from putting out the fire.
Direct and Indirect Losses
Indirect loss is a financial loss incurred as a result of direct damage to property. For a business, this includes loss of profits, rent and continuing or extra expenses necessary to keep the business operating after a direct loss. In the case of a personal dwelling, indirect loss involves the possible loss of rent from a rental unit in the dwelling or the extra expenses the homeowner incurs from living in a motel while his or her home is being repaired after a direct loss.
With more than 20% of South Africa’s working population supporting more than their immediate families, saving from an early age is crucial to break the dependence cycle. Tshepho Chokoe says figures from Statistics SA show that 32.2% of South African households have more than one generation living under one roof and that this trend is increasing amongst the urban white population too.
“Individuals who find themselves having to support both their parents and children are so financially squeezed that they often don’t save enough for their own retirement. The irony is that a lack of retirement savings on their parents’ part is usually the reason why they find themselves in this situation in the first place. So unless they save enough, they risk being in their parents’ position when they retire.”
Tshepho says breaking the dependency cycle and achieving financial freedom is possible if you follow the right steps. Here are a few steps to start your journey to financial freedom:
Step 1: Get other family members to help
You may be avoiding frank financial conversations with your dependants for the sake of peace. However, this may soon cause more financial problems and resentment. Open conversations may help you adapt the family’s lifestyle in line with your financial constraints. You may also identify means to earn additional income or find ways in which dependent members of the family can also contribute to the household finances.
Step 2: Get a grip on your debts
Indebtedness often goes hand in hand with supporting dependants for extended periods of time. Servicing debt may thus consume a large chunk of your disposable income. Pay off debt with the higher interest rate first and try to stay away from bad debt. But while paying off debt is more pressing, try to strike a balance between this immediate expense and saving for retirement. Playing catch-up on retirement savings can be very costly since the later in life you start saving, the less you benefit from the power of compound interest.
Step 3: Talk to a financial planner
A qualified financial planner will consider the entire family situation when assessing your needs. He or she can help to clarify financial constraints and imperatives as part of a holistic picture, while also identifying areas where extra savings can be unlocked by utilising tax incentives on products like retirement annuities or tax-free savings accounts.
Contact Tshepho Chokoe – 012 310 0160
Sanlam is a Licensed Financial Services Provider.
The threshold below which no donations tax is payable is R100 000. Thereafter a 20% flat rate of value on property is payable.
In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R 10 000 p.a. in total.
Dispositions between spouses and donations to certain public benefit organisations are exempt from donations tax.
Capital gains tax
The annual capital gains tax exemption for individuals has been increased to R30 000. The monetary threshold below which no capital gains tax is imposed at death is R300 000.
What is Estate Duty?
Estate Duty is charged, levied and collected from the estate of every person who dies on or after 1 April 1955 in terms of the Estate Duty Act, 1955, Act 45 of 1955 (the Act). Estate Duty is charged at the rate of 20% upon the taxable amount of the estate calculated in terms of the Estate Duty Act. Under current legislation it is levied on the “dutiable amount of the estate” exceeding R3 500 000.
Who is responsible for payment of Estate Duty?
In general, the estate is liable for Estate Duty and it shall be paid by the executor. Where a policy was paid to a beneficiary directly, the beneficiary is liable for the proportionate share of the Estate Duty payable.
Who is responsible for the collecting of Estate Duty?
The Commissioner for SARS is responsible for administering the Estate Duty Act. SARS has delegated its powers and authority to the Master of the High court. There are 14 Masters’ offices in SA (Pretoria, Bloemfontein, Kimberley, Cape Town, Port Elizabeth, Grahamstown, Durban, Pietermaritzburg, Polokwane, Bisho, Johannesburg, Mmtata, Thohoyandou, and Mafikeng).
SARS remains responsible for collecting the Estate Duty.
How does one declare Estate Duty?
The Executor will calculate the Estate Duty when preparing the liquidation and distribution account. He will then complete the Estate Duty return (REV 267)and send to the Master of the High Court’s office where the estate is registered. A copy of the liquidation and distribution account must be sent with the REV 267. The Master will then assess the Estate Duty payable.
When should Estate duties be paid?
The duty assessed must be paid within 1 year of date of death or on the date prescribed in the notice of assessment. Currently interest will be levied at the rate of 6% p.a on late payments.
What is it?
Transfer Duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. It’s based on the value by which any property has increased when you come to dispose of that property. For the purpose of Transfer Duty, property means land and fixtures and includes real rights in land, rights to minerals, a share or interest in a “residential property company” or a share in a share-block company. All Conveyancers are requested to register with SARS.
These are the Transfer Duty rates applied to properties acquired on or after 23 February 2011, and apply to all persons (including Companies, Close Corporations and Trusts):
VALUE OF PROPERTY (Rand)
R0 → R600 000 0%
R600 000 → R1 000 000 3% on the value above R600 000, but not exceeding R1 000 000
R1 000 000 → R1 500 000 R12 000 plus 5% on the value above R1 000 000, below R1 500 000
R1 500 000+ R37 000 plus 8% on the value above R1 500 000