Ultima Financial Planners - News

Saving for retirement and drawing an income from the savings (capital and investments) after retirement are matters that investors are always concerned about. Years of first-hand experience have shown us that most people nearing retirement have not accumulated enough savings. Another matter that causes investors to feel anxious is the uncontrollable spiraling of costs, such as fuel, rates and taxes, electricity and medical expenses. Insufficient savings also mean that retirees have to withdraw a lower income from their capital.

Independent research, including the research done by the financial planning company acsis, shows that a retiree’s maximum initial draw-down rate should not be more than 4%. A draw-down rate of 4% on a capital investment of R1 000 000 translates into an income of R3 333,33 per month, assuming the following: that you are 65 years old, that your capital must last you for another 30 years and that you will increase your annual income to keep track of current inflation (not your own calculated inflation rate). Furthermore, your underlying investment portfolio must target a return of 4% above inflation. If your personal circumstances differ from the above analysis, you should make the necessary adjustments to suit your situation.

Perhaps you thought you could easily draw an income of 10% from an investment of R1 000 000, and you question the low draw-down rate of 4%. But remember that although the average return of the JSE has been inflation plus 7% over the long term, the returns fluctuate constantly. If the market is negative in the first few years of your retirement, and you draw a higher income, you will find it difficult to recover later. If you increase your draw-down rate in accordance with the inflation rate while the market is negative, you will exacerbate the situation.

Drawing an income of 4% of the capital value at the start will give you a confidence factor of 90%. This means that there is a 90% chance that your capital will last you until the age of 95, and that your income will escalate every year. If you start with a draw-down rate of 7,5%, your confidence factor declines to 60%. This means that your chances of achieving your target goal will be only 60%. This is too great a gamble.

A solution could be to draw down say 5% over your full retirement period. The upside of this strategy is that you will probably not run out of money and, assuming your investment portfolio has the correct underlying asset allocation (shares, property and cash), your income will increase over time. The downside of this strategy is that your income will decline when there is a decline in the market, and this could be unsettling.

Deur Shaun Latter – acsis Afrigter in Finansiële Beplanning

Organisasies oor die hele wêreld is erg deur die huidige treurige marktoestand en ekonomiese omgewing geaffekteer. As gevolg daarvan staar baie mense nou moontlike afdanking in die gesig.

Afdanking, hetsy gedwonge of vrywillig, kan een van die mees ontstellende ervarings in ‘n mens se lewe wees. Afgesien van die emosionele sy daarvan, gee dit aanleiding tot verskeie finansiële bekommernisse waarmee jy nie voorheen hoef te geworstel het nie. Van die vrae wat jou kan teister kan wees hoe om die mas op te kom tot jy weer ‘n werk kry, moet jy die enkelbedrag tot jou beskikking gebruik om jou skuld af te betaal en wat is die beste manier om jou geld te laat hou. In die tydperk wat op jou afdanking volg, is dit belangrik dat jy gesonde finansiële beplanning aan die dag lê. Dít kan bepalend wees vir jou langtermyn finansiële welstand.

Die natuurlike reaksie op afdanking is gewoonlik skok en dikwels woede, wat dan noodwendig oorgaan na gevoelens van onsekerheid. Dit gebeur wanneer ons “grotman”-instink oorneem; ons neem ‘n pas-aan-of-kom-om-houding aan en ons verstek-denkpatroon word een van oorlewing. Maar terwyl ons in hierdie oorlewingsdenkpatroon vasgevang is, bestaan daar min twyfel dat logiese, gesonde, langtermyn finansiële besluite ons sal begin ontwyk.

Hoewel afdanking angstigheid meebring, sê baie mense later dat dit die skop was wat hulle aan die gang gesit het om ernstig oor finansiële onafhanklikheid te begin dink. Maar waar begin jy?

Eerstens moet ons onsself teen die “grotman” in ons binneste beskerm. Dit is belangrik om ‘n stewige raamwerk te hê waarvolgens ons ingeligte en logiese besluite kan neem wat ons doelstellings vir die toekoms en ons huidige behoeftes in ag neem. Daarom moet jy eers jou huidige situasie evalueer, en dit wat jy nou tot jou beskikking het, bepaal, en dan jou paadjie vorentoe in ooreenstemming met jou behoeftes beplan.

Jou huidige situasie word gewoonlik deur jou huidige likiede beleggings bepaal, asook deur die skeidings- of afdankingspakket wat aan jou betaal is. Die volgende is basies wat jy kan verwag om by afdanking te ontvang:

~         skeidingsbetaling – gewoonlik is dit ten minste ‘n week se betaling vir elke voltooide en onafgebroke jaar se diens. Neem kennis dat die eerste R30 000 belastingvry sal wees – ‘n eenmalige vrystelling deur SARS.

~         uitstaande verlof – dit word as bruto inkomste uitbetaal

~         kennisbetaling – dit is gewoonlik vier weke se betaling (vir meer as een jaar se diens)

~         pro rata bonus – dit sal van jou indiensnemingskontrak afhang

~         Werkloosheidversekeringsfonds – die formules is nogal ingewikkeld en hang van inkomstekategorieë en jare diens af. Dit maak dit baie moeilik om te bepaal wat presies mens kan verwag. Die algemene riglyn is dat mens ongeveer 40% van jou finale salaris vir omtrent nege maande sal ontvang. 

~         pensioen-/voorsorgfonds – jy kan kies om jou aftree-spaargeld later na jou nuwe werkgewer se fonds of na ‘n bewaringsfonds oor te plaas. Jy kan ook kies om jou voordeel te onttrek en die kontant te neem.

Met die uitsondering van jou pensioen-/voorsorgfonds moet jy al die bogenoemde gebruik om jou skuld te delg en jou te help om jou maandelikse uitgawes te betaal. Wanneer jy besluit wat om met jou pensioen-/voorsorgfonds te doen, moet jy baie versigtig die gevolge van jou besluit oorweeg. Indien jy, soos baie mense, in die versoeking kom om die kontant te neem, moet jy in gedagte hou dat die bedrag erg deur belasting geërodeer gaan word en dat die langtermyngevolge rampspoeding kan wees.

Byvoorbeeld, ‘n 40-jarige wat die afgelope 10 jaar 10% van sy of haar pensioendraende salaris bygedra het en beplan om op 60 af te tree sal ten minste drie keer meer onmiddellik na afdanking moet bydra net om vir die verlies aan saamgestelde rente te vergoed. Hoe langer jy bygedra het en hoe nader jy aan aftrede is, hoe meer is die faktore wat tot jou nadeel is. Dit is veral ‘n belangrike punt om te oorweeg indien jy daaraan dink om die kontant te neem om jou verbande af te betaal.

Sodra jy ‘n goeie idee van jou huidige finansiële situasie het, kan jy begin om aandag aan jou behoeftes te gee. Jou behoeftes moet realisties en weldeurdag wees want jou strewe moet wees om jou maandelikse uitgawes so laag moontlik te hou. Die twee gebiede waar dit bereik kan word, is die volgende:

gesinsbegroting

Hou ‘n dinkskrum met jou gesin (onthou dis ‘n gesamentlike poging) en stel ‘n omvattende begroting op. Dit sal julle in staat stel om te onderhandel oor waar julle die uitgawes kan besnoei. Daar kan ononderhandelbare uitgawes soos veiligheid en mediese dekking wees, en dit is te verstane. Die geheim is om almal wat betrokke is sover te kry om in te koop en verbind te bly.

skuld

Wanneer jy willekeurige uitgawes sover moontlik besnoei het, moet jy aandag aan skulddelging gee. Rente op skuld het ‘n verlammende effek op jou maandelikse verpligtinge en algemene finansiële welstand. Die praktiese reël is dat kortertermynskuld (bv ‘n kredietkaart) se rentekoers gewoonlik hoër is en daarom eerste afbetaal moet word. Waar moontlik moet die enkelbedrag wat jy ontvang, gebruik word om hierdie tipe skuld af te betaal.

Die mees gepaste benadering om jou finansies te bestuur hang geheel en al van jou persoonlike situasie af. Selfs al begin jy onmiddellik met ‘n nuwe werk, sal die keuses wat jy nou maak jou toekomstige lewenstyl bepaal. Dit geld veral vir die besluite wat jy oor jou aftree-spaargeld neem. Daarom is dit altyd ‘n goeie plan om ‘n Gesertifiseerde Finansiële Beplanner te raadpleeg om jou te help om ‘n strategie uit te werk wat aan al jou behoeftes en doelstellings vir die toekoms voldoen.

As financial planners, one aspect of our commitment to our clients, is to continually be on the lookout for possible scams and investment fraud. Ian De Lange from Seed Investments wrote the following article which we believe is crucial to trying to avoid investment scams.

This week South Africa was rocked with an investment scandal, that in terms of the purported sheer size of up to R15 billion, will dwarf any previous scams. While we know that despite tight regulations, there will always be scams looking for culprits, it is very important that investors assess counterparty risk before an investment is made.

In the alleged scam of Tannenbaum billions of rands were invested into a private operating company promising investors fantastic returns. It amazes how supposed smart investors apparently put in millions without a hint of due diligence.

I found this on the CFA (Chartered Financial Analyst) website, adapted slightly for local situation. There are no guarantees, but with investments it is vital that counterparty risk is reduced to as close to zero as possible.

10 tips on avoiding investment fraud – posted after the Bernie Madoff scheme came to light.

1. Understand clearly the investment strategy – “Some investment opportunities appear alluring simply because they are described in impressive, complicated terms. Investment strategies and financial products should be clear and understandable. The nature of the risks involved can vary widely and should be well understood. Even the venerable Peter Lynch advised people to invest only in what they understood – advice he abided by in his successful career. If you don’t understand it, stay away.

2. Match investment strategy to reported performance – One of the red flags in the Madoff affair is that reported performance was too consistently good. Other investment scams, popular on the internet, purport to use ultra-safe “prime bank” financial instruments from the world’s largest banks. E-mails that promise double-digit returns are incongruent with the safe investment strategies they purport to offer. Also, find out if the firm has its reported performance numbers independently audited, who audits them, and if possible whether these figures comply with Global Investment Performance Standards, a set of ethical principles for calculating and reporting investment results.

3. Watch for e-mail solicitations and Internet fraud – The internet is a low-cost way for scammers to reach millions of people. Unsolicited e-mail messages offering you investment opportunities that sound too good to be true probably are. Online bulletin boards and electronic investment newsletters are also fertile ground to disseminate false information on thinly traded stocks for a pump-and-dump scheme. Treat information from unknown sources on the internet with great suspicion.

4. Be wary of “sure things,” quick returns, and special access – Legitimate investment professionals do not promise sure bets. Legitimate get-rich-quick schemes simply do not exist. Scammers often make the implausible combination of safety and high returns seem plausible by granting you “special access” based on your relationship with a mutual acquaintance or affiliation with a specific religion or ethnic group. Also, understand clearly the terms by which you can redeem shares or exit the investment. When can it be done and what are the fees? Ponzi schemes become unsustainable when investors pull out their money.

5. Understand what, if any, regulatory oversight exists – Fraud may be less prevalent in regulated settings, like mutual funds. Hedge funds are less regulated than mutual funds and the risks must be carefully analysed.

6. Assess the operational risk and infrastructure – Any investment management operation should have a physical infrastructure for trading and administration. Ask to see them and inquire about the firm’s processes and controls. It is important that a firm have separate, independent operations for asset management, trading, and custody to provide checks and balances against fraud.

7. Ask about independent audits and who performs them. An auditor should be independent, reputable, and congruent with the size and scope of the investment operation.

8. Assess the personnel – Ultimately, the reliability of any operation is predicated on the integrity and competence of its people. So find out who makes investment decisions and who implements the investment strategy. They should be separate people with relevant experience, education, and training. Credible investment professionals speak knowledgably and comfortably about their professional standards.

9. Perform a background check. If an advisor firm or investment manager is not listed with the FSB (www.fsb.co.za), find out why. If they are, make sure their record is clear.

10. Limit your exposure – One of the surest ways to avoid the catastrophe associated with investment fraud is to limit the amount you invest. Diversification is one of the most fundamental and enduring investment principles. Investors often expose themselves to unnecessary risks by concentrating their funds in one or two securities. By limiting your exposure to five to 10 percent of your assets, the principle of diversification can protect you if an investment turns out to be fraudulent.

Although these points cannot guarantee that you will avoid investment fraud, they will increase the likelihood that you will make smart choices.

Eighteen months ago, investors were euphorically excited about investing in shares. Risk or the danger that shares could ease didn’t play any role in decision-making. The situation at the time was almost reminiscent of vultures at a carcass.

The rest is, as they say, history. Shares are dead, or at any rate, they are like a disgraced family member - the family prefers not to talk about the situation.

The investment environment has indeed changed fundamentally.  Large companies with previously proven yield histories of more than a hundred years suddenly no longer exist. The market capitalization of others that survived has shrunk alarmingly. 

Investors are thus afraid with good reason. Few people have lived through such an economic crisis in their lifetime. Lifebuoys thrown out by governments to stabilise the economies have had little influence so far.  

Our own economy is only now really starting to feel the cold winds of change while experts warn that the worst is yet to come.

Shares are thus dead with good reason … or are they really? Although no experienced vulture will leave a fresh carcass in peace, the danger exists that investors may be allowing the biggest investment opportunity of their lives to slip through their fingers.

Although nobody can correctly predict the turning point of the bear market, several fund managers agree that there are many companies out there who will successfully survive the storms. The market has the tendency to turn while economic news is still very dark.

Could it be that investors will be caught on the wrong foot again?

If you are young or perhaps began saving recently, you can lay a solid foundation for the future by investing in a focussed shares investment strategy. In future, do not become panicky when such negative economic times re-appear. Remember that markets always move in cycles and by investing more when the markets are easing, you can really improve your total yield over time.

If you are already retired and withdraw an income from your portfolio, you must diversify to effectively counteract the negative cycles. Make sure that you have a tested investment strategy and stick to it in the long term.

If, in the longer term, the top business entrepreneurs can’t do better with their capital than a safe bank investment, then shares are indeed dead. 

Shares are dead - long live shares!

Agtien maande gelede was beleggers eufories oor die prestasie van aandelebeleggings. Dat daar risiko aan verbonde kan wees of dat die gevaar bestaan dat die aandele kan daal, het toe geensins ‘n rol by besluitneming gespeel nie. Die situasie het mens amper aan aasvoëls by ‘n karkas laat dink.

Die res is, soos hulle sê, geskiedenis. Aandele het gesneuwel – oftewel hulle word behandel soos familielede wat skandes gemaak het en oor wie daar liewer nie gepraat word nie.

Die beleggingsomgewing het inderdaad wesenlik verander. Groot maatskappye met ‘n bewese opbrengsgeskiedenis van meer as honderd jaar bestaan skielik nie meer nie. Ander wat oorleef het, se markkapitalisasie het kommerwekkend gekrimp.

Beleggers is dus met goeie rede bevrees. Min mense het al ‘n soortgelyke ekonomiese krisis beleef. Die reddingsboeie wat deur regerings uitgegooi is om die ekonomie te stabiliseer het tot dusver min invloed gehad.

Ons eie ekonomie begin nou eers werklik die koue winde van verandering voel, terwyl kenners maan dat die ergste nog aan die kom is.

Is aandele dus waarlik dood … of is hulle nie? Alhoewel geen deurwinterde aasvoël ‘n vars karkas met rus sal laat nie, is die moontlikheid tog daar dat beleggers dalk die grootste beleggingsgeleentheid ooit deur hul vingers kan laat glip.

Alhoewel niemand waarskynlik die draaipunt van die beermark reg kan voorspel nie, is menige fondsbestuurder dit eens dat daar vele maatskappye daar buite is wat die storms suksesvol sal oorleef. Die mark het die geneigdheid om te draai terwyl die nuus op die ekonomiese front steeds ‘n baie donker prentjie skilder.

Kan dit wees dat beleggers weer onkant gevang gaan word?

Indien jy jonk is of dalk onlangs met ‘n spaarpoging begin het, kan jy vir jou ‘n stewige fondasie vir die toekoms lê deur in ‘n gefokusde aandelebeleggingsstrategie te belê. En moenie paniekerig word as daar in die toekoms weer swaar ekonomiese tye is nie. Onthou markte beweeg altyd in siklusse en deur meer te belê wanneer die markte daal, kan jy jou totale opbrengs oor tyd baie verbeter.

Indien jy reeds afgetree is en inkomste uit jou portefeulje moet onttrek, moet jy diversifiseer om negatiewe siklusse effektief teen te werk. Maak seker dat jy ‘n getoetste beleggingsstrategie het, en hou daarby oor die lang termyn.

Indien die top sake-entrepreneurs vir die langer termyn nie iets beter met hulle kapitaal kan doen as om dit in ‘n veilige bankbelegging te plaas nie, dan is aandele inderdaad dood.

Aandele is dood, lank lewe aandele!