By James Fraser
After a rewarding career, the ideal scenario would be to maintain a comfortable lifestyle for you and your family.
The reality faced by many is that they would not have achieved this goal. Research shows that only 6% of South Africans will have made adequate retirement provision while 49% do not have a retirement plan.
Other than continuing to work into retirement years due to financial obligations, we look at some ways to bolster retirement provision.
Determine how much is enough
This can be tricky to determine but having a sense of how much money will be needed to cover expenses helps to establish if the retirement plan is on track.
Consider what monthly spending requirements will realistically cost in retirement, such as medical aid, short-term premiums, etc. About 33% of retirees underbudget funds to cover medical expenses, which is the second largest expense in retirement. Keep in mind ad hoc expenses (such as holidays) and a reasonable amount to set aside as an emergency fund.
PPS offers a unique benefit to its qualifying members which enables them to fund PPS Insurance, PPS Short-Term Insurance, and Profmed premiums directly from their Vested PPS Profit-Share Account, where available.
This benefit allows members to extend their retirement savings.
Take a consolidated view of retirement savings
Some people may have retirement savings spread across various retirement fund providers, or have savings earmarked in product wrappers not specifically designed for retirement savings.
Aim to take a consolidated view of all retirement savings across providers to get a better reflection of what could be available when retiring.
There are tools and calculators available to show illustrative future values and give an indication of how much additional savings is required monthly to achieve the goal within the time that’s left before retirement.
Consolidating investments with one provider could also afford access to reduced ongoing administration fees.
For example, PPS Investments offers access to a sliding fee scale on a combined market value of R1.5 million and above.
The same access can be extended to families who invest at PPS Investments through the Family Network.
Combatting inflation
Inflation globally remains at elevated levels.
Conventional wisdom teaches us that we should seek out certain asset classes during periods of high inflation.
Certain asset classes, like inflation-linked bonds, which have an inflation hedge serving as a buffer against inflation as the coupon and principal adjusts as inflation changes; and cash, which tends to benefit from increasing short-term rates, as monetary policy acts to control the inflation level.
However, another way to look at this scenario is to seek investment options offering layers of diversity, such as a multi-managed fund, which is aligned to the investment objective, for example, CPI+3% and time horizon (short-, medium- or long-term).
A multi-managed fund combines various asset classes, managers, and funds, which are blended to create an optimally diversified portfolio well-poised to achieve the set objective over time.
With sensible diversification, market forces like inflation shouldn’t matter because different components of the fund will perform well during various phases in the market cycle.
Invest beyond retirement
When reaching retirement, there’s no need to stop investing toward retirement savings.
There are retirement vehicles, such as living annuities, that offer a component of continued growth alongside a regular retirement income stream. It’s important to be comfortable with market fluctuations, as the risk associated with investing is carried by the annuitant.
James Fraser is the Chief Operating Officer at PPS Investment.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.
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