MONEY
WE A LT H
CONTROL THE THINGS YOU CAN How to make the most of your retirement savings.
M
BY MICA TOWNSEND, BUSINESS DEVELOPMENT MANAGER AND EMPLOYEE BENEFITS CONSULTANT AT 10X INVESTMENTS
oving into
making decisions about your
streams, you have some
retirement can be
income, and the risk that
flexibility and can afford to
Living Annuity is that you
worrying. There
bad decisions could mean
take on more investment risk.
outlive your savings. You
running out of money.
The opposite is true if you live
need to consider the draw-
on a shoestring budget, barely
down rate in the context of
covering your bills.
your time horizon, your asset
is an instinctive fear of consuming capital and the
Your retirement pot may
Your major risk with a
prospect of a diminishing
have to last for a long time,
lifestyle. Fortunately,
so you need to give your
these concerns can be
money the best chance to earn
depleted by fees, as well as
addressed with a few well-
returns that outpace inflation
by what you draw. According
such as the 10X Retirement
informed decisions, says
over time, which means
to government estimates,
Calculator, which you will
Mica Townsend, Business
putting some money in the
the industry average fee for
find on the 10X website
Development Manager at
share market.
living annuity investors is
www.10x.co.za, can help you
approximately 2.5% (plus VAT)
find your optimal sustainable
alternatives offered, your
of the investment balance
draw-down rate, based on
living and a life annuity
choice is essentially a high-,
(0.75% for advice, 0.25% for
your estimated life expectancy
at retirement requires
medium- or low-equity
administration and 1.5% for
and other parameters.
careful evaluation of your
portfolio. Don’t ignore your
investment management).
circumstances. The key
personal risk tolerance here.
difference is flexibility. With
There is no point investing
on your LA prudently, at
capital that remains after you
a life annuity, you are bound
in a high-equity portfolio for
say 4% to 5% pa, paying an
pass goes to your nominated
to a predetermined income
long-term growth if the stress
additional 2,5% in fees will
beneficiaries (either as a lump
for life, which might feel more
of market volatility sends you
equal half your retirement
sum or an annuity).
secure but, over the long term,
to an early grave. While the
income. This will take years
can penalise you.
share market promises to
off your savings. One of the
do to increase your retirement
boost your returns, it will also
flexibilities with a living
pot once you have stopped
test your nerve.
annuity is that you are not
working, there’s much you can
10X Investments. Choosing between a
You may be very active in your sixties and seventies, incurring travel
Despite the many
If you are drawing down
mix and the fees you pay. Financial planning tools
One of the attractions of a living annuity is that any
While there is little you can
tied to a provider so, if your
do to make your savings last: a
and recreational expenses,
the portfolio building blocks
fees are too high, you can
low-cost high-equity portfolio
requiring a higher, more
together yourself, or you could
switch to a provider that
can add many years of
flexible income to start
choose to invest in a balanced
charges less, ideally less
sustainable income, provided
and a lower, more secure
multi-asset fund – the latter
than 1%. The 10X Living
you draw down prudently.
income later. A living annuity
being the more prudent.
Annuity does not charge for
But, ultimately, the best way to
advice or administration, and
control your anxiety is to stay
accommodates these realities
You may consider putting
Your savings will be
Importantly, don’t view
by allowing you to choose
your living annuity portfolio
investors pay a maximum
informed, to control what you
your investments and
in isolation. If you have
fee of 0.87% (including VAT),
can, and to accept what you
income. However, flexibility
significant non-retirement
which reduces for amounts
can’t. And, famously, to know
brings the responsibility of
savings or other income
above R5m.
the difference. •
16
SILVER DIGEST // SUMMER 2020/2021
