The best retirement fund ever

This means the status quo will remain for the foreseeable future. In other words, most imminent pensioners will discover a few weeks before they actually head of into retirement that their pension (if any) will not be sufficiently adequate and that painful downward financial adjustments will need to be made for monetary survival. Many retirees will tackle this problem by continuing to work, if they are fortunate enough to find employment.

In the unusual event the pension is adequate at time of retirement it will not be too many years before the moths of inflation will have made their negative presence felt.

It is a well publicized fact that retirement planning in South Africa is a dismally neglected pursuit. Despite the noble and well intentioned desires of government and the financial services industry, there does not appear to be any effective measures aimed at putting this issue to rights.

It is universally accepted that retirement products are sold rather than purchased (the sales person instigates the sales process) and if we are to be brutally truthful, the prime motivator is probably the commission that will be earned on the sale rather than a desire to establish an effective retirement strategy.

 

Generally speaking, the affordability rather than the retirement needs of the client is the yardstick by which contributions are established. To underpin our assertion, we would suggest there is hardly a person alive who can, with any authority or confidence, state what monthly income, in current value terms, their retirement product is likely to provide for them.

 

Commission payments on retirement products have received negative press over recent years. This has no doubt had a restrictive effect upon product sales and it might possibly make sense to increase commission levels so that sales of such products could receive a boost.

 

In order for retirement planning to be effective, it should question the myth that 15% of salary over a working lifetime is an appropriate contribution. It should be exposed as a dangerously incorrect assumption as the actual level of necessary contribution will prove to be horrifically higher than that.

 

To construct an effective retirement strategy means the potential retiree should select a suitable retirement income level need and capital requirement at present day levels.

 

Although inflation is the pensioner’s real enemy, that problem can be overcome by any experienced financial consultant who can use a financial calculator.

To accumulate a sufficiently large enough fund at retirement will depend upon three factors, namely: rate, return and time. As most people don’t save enough for long enough they should make every effort to maximize investment returns. Most retirement product suppliers offer a wide choice of investment portfolios on individual retirement annuities and prudent selection and structure of such portfolios should be an important priority.

 

For any "Money Purchase Retirement Fund” (As opposed to a Final Benefits Pension Fund), a decent structure of investments at inception plus regular tracking and revision can have a significant impact upon final maturity values. Some people will feel inadequate and unqualified to involve themselves in such seemingly technical areas but there are many experienced financial consultants who can assist in this important task.