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Align your Retirement Annuity with your Retirement Goals

Annuities are insurance products that provide a source of income during retirement. Whereas life insurance pays a benefit if an insured person dies, an annuity makes payments as long as an insured person lives. Retirement annuities are often used as an investment option by: 

  • Self-employed people
  • Employees in organisations that do not provide a pension or provident fund
  • Employees who earn a significant amount of non-pensionable income and wish to increase their savings towards retirement.

Retirement annuities can also be used to house the proceeds of your pension or provident fund when terminating your employment. RAs are tax-friendly investments, but remember, in most instances it is not possible to withdraw funds from your RA before you turn 55. 


Aligning your Retirement Annuity (RA) with your retirement goals is crucial to ensure a financially secure and enjoyable post-work life in South Africa. A well-planned RA strategy helps you create a steady income stream, maintain your lifestyle, and achieve your retirement aspirations. With the ever-changing economic landscape and increasing life expectancy, it's essential to regularly review and adjust your RA to meet your evolving needs. 


By following a structured approach, you can ensure your RA aligns with your retirement goals, providing peace of mind and financial freedom. 

Determine Your Retirement Needs by Evaluating your Current Lifestyle

As you look forward to retirement, it's essential to evaluate your current lifestyle to determine what you'll need to maintain your desired standard of living in your golden years. From everyday expenses like groceries and transportation, to discretionary spending on hobbies and travel, understanding your current financial habits and priorities will help you create a realistic and personalized retirement plan. 


By taking a close look at your current lifestyle, you'll be able to identify areas where you can adjust, optimize, and ultimately, create a more secure and fulfilling retirement. 

1. Estimate your retirement age and expected lifespan.

2. Calculate your desired monthly retirement income (consider inflation and expenses).

3. Consider your retirement goals (travel, hobbies, or supporting dependents). 


Evaluate Current Lifestyle

Track expenses: Record daily, monthly, and annual expenditures.

Categorize spending: Housing, transportation, food, entertainment, etc.

Identify necessities: Essential expenses vs. discretionary spending.

Assess debt: High-interest loans, credit cards, mortgages.

Consider lifestyle changes: Downsizing, relocation, or changes in family dynamics.

Assess Your Current RA

Review your existing RA and contributions.

Evaluate your RA’s performance and fees.

Consider consolidating multiple RA’s into one.


Grow Your Retirement Annuity

Increase contributions: Take advantage of tax benefits and contribute as much as possible.

Optimize investment options: Choose a diversified portfolio aligned with your risk profile.

Consider additional retirement savings vehicles (e.g., pension funds or tax-free savings accounts).


Monitor and Adjust your Provident Fund

Regularly review your Provident fund’s performance and adjust contributions or investments as needed.

Review both your Provident and Retirement funds when in discussion with a professional financial advisor.

Update your provident fund strategy to reflect changes in your retirement goals or circumstances.

Retirement Planning Considerations

Inflation: Check the current inflation rate and factor that in your calculation for the annual escalation rate (usually around 5-6% escalation to cater for inflation)

Increased life expectancy: Plan for 25-30 years in retirement.

Healthcare costs: Factor in potential medical expenses.

Long-term care: Consider nursing home or home care costs.

Housing: Plan for maintenance, property taxes, and potential relocation.

Transportation: Consider reduced mobility and potential transportation costs.

Food and entertainment: Account for changes in spending habits.

Travel: Plan for potential travel expenses.

Hobbies: Consider costs associated with retirement activities.

Emergency fund: Ensure 1-2 years' expenses are covered.


Additional Tips

1. Take advantage of tax benefits: Contribute up to 27.5% of taxable income or R350,000 per annum.

2. Consider a retirement annuity calculator to estimate your needs.

3. Prioritize preservation: Avoid withdrawing from your Retirement fund before retirement.

4. Diversify your income streams: Consider other retirement income sources (e.g., pension or rental income).

There is no quick fix for long term aspirations

Set realistic timelines. Your plans must match the time you have remaining to retirement. If you still have 20 years to retirement, you can afford high risk investments, but not when you are 5 years closer.

Start where you are, with what you have. As your earnings increase, you can increase your contributions towards your investments. 


Using M.A.L.I, our AI financial guru, you can build a financial retirement plan tailored to your needs and learn how to invest to make it happen! 

We have more pages available to further strengthen your retirement planning journey:

- Provident & Retirement Fund

- Two Pot System

- Life Annuity vs Living Annuity

- Investment Products & Asset Classes

- Life Stage Planning Module

    Discovering Your Retirement Vision

    As you approach retirement, it's essential to have a clear plan in place for how you want to spend your golden years. Having a well-defined retirement vision can help you make the most of this new chapter in your life, ensure a smooth transition, and alleviate financial stress.
    Why Having a Retirement Plan Matters: Retirement can be a significant life change, and without a plan, you may feel unfulfilled, restless, or even bored. A retirement plan helps you:
    Maintain purpose and meaning: Engage in activities that bring you joy, challenge, and a sense of accomplishment.
    Ensure financial sustainability: Make the most of your retirement savings and create a sustainable income stream.
    Stay physically and mentally active: Pursue hobbies, travel, and social activities that promote overall well-being.
    Nurture relationships: Strengthen bonds with family and friends, and potentially build new connections.

    How to Determine Your Retirement Vision: To create a fulfilling retirement plan, follow these steps:To create a fulfilling retirement plan, follow these steps:
    Reflect on your values and priorities: What matters most to you in retirement? (e.g., family, travel, hobbies, personal growth)
    Explore your interests and passions: What activities have you always wanted to pursue, but never had the time? (e.g., painting, gardening, cooking, volunteering)
    Assess your skills and experience: How can you leverage your professional expertise or life skills in retirement? (e.g., consulting, mentoring, teaching, freelancing)
    Consider your lifestyle preferences: Do you want to travel, downsize, or relocate? Do you prefer a relaxed or active lifestyle?
    Evaluate your financial situation: What are your retirement income sources, expenses, and savings goals?
    Research and gather inspiration: Read books, articles, and online forums to explore different retirement lifestyles and ideas.
    Create a retirement vision statement: Write a concise, inspiring statement that captures your retirement goals and aspirations.

    Putting Your Retirement Plan into Action: Once you have a clear retirement vision, you can start making intentional decisions to achieve your goals. This may involve:
    - Creating a retirement budget and financial plan
    - Developing a hobby or passion project
    - Building a social network or community
    - Pursuing education or training opportunities
    - Exploring volunteer or part-time work options
    By taking the time to discover your retirement vision, you'll be better equipped to create a fulfilling, purpose-driven life in your golden years.
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    The Most Often Overlooked Step In Retirement Planning

    Beginning with your vision is a fundamental difference between retirement planning and investment planning. Retirement planning allows you to use your money as a tool to further your goals rather than turning the investment of your money into a goal in and of itself.

    Read the Forbes article HERE

    One year before retirement: here is your important checklist

    Even if you are looking forward to the end of your working life, the idea of retirement can be daunting. There is often an instinctive fear of moving into a stage of life where you may end up consuming your capital, as well as anxieties about a diminishing lifestyle. Like most challenges in life, preparation is key, says Asavela Gwele, client relationship associate at 10X Investments.

    Read the BusinessTech article HERE